Parents who fill out the Free Application for Federal Student Aid, or FAFSA, are often shocked by how much the federal government thinks they can afford to pay for college when they receive their official “Expected Family Contribution,” or EFC.
According to Kim Clark at USNews Education, some fundamental aspects of the federal formula for calculating the affordability of college are the reason for the shock.
1. Outdated budget estimates. The Education Department bases its estimate of what families can afford today on a government budget for a “family maintaining a lower standard of living” in 1967. That budget has been adjusted for inflation every year. But it has not been adjusted for changes in family spending patterns. During the 1960s, fewer wives worked, for example, so families spent much less on child care. The antiquated budget also can’t account for modern technological expenses such as cell phones, computers, or internet access.
2. No regional adjustments. The government doesn’t account for the different costs of living in different cities. The Council for Community and Economic Research, which produces widely used data for tracking cost of living, estimates that living in New York City, for example, costs more than twice as much than living in, say, Pueblo, Colo. Yet the federal government assumes Brooklyn, N.Y., families paying, say, $2,000 a month for a three-bedroom apartment can afford to spend as much on college as similar families with comparable income paying only $1,000 for a similar home in lower-cost communities.
3. Unrealistic family spending assumptions. The government’s formula doesn’t make any accommodation for parents whose disposable income is reduced because of their own student loan bills, even though a growing number of parents are still paying off their own student loans as their kids enter college.
These policies mean the EFC is “at best, a very harsh assessment of families’ ability to pay,” says Mark Kantrowitz, publisher of FinAid.org. At worst, he says, it is “somewhat unrealistic…and archaic.”