Can You Shrink Your EFC?

My last college blog post focused on a dilemma that many families face. When parents calculate what their Expected Family Contribution is, they discover it’s far higher than they anticipated.

If you missed the post, here it is: Is Your EFC Too High?

Today I want to stay on that topic and share an email that I received from a dad, who has a daughter in 11th grade and another in seventh grade. He was wondering if he should hire a firm that has promised to reduce his EFC by tens of thousands of dollars.

Here is part of the dad’s email:

Based on several EFC calculators on the web, it isn’t likely that we would get financial aid. Our EFC stands at as low as $30,000 to upper $40,000 to low $50,000′s. My income is about $140,000 and we identify ourselves as a bit high income and low assets.

One college planning consultant claims that they can reduce our EFC to the $20,000 range but they can’t reveal what the strategies are (of course.)

The bottom line is that I am looking for ways/strategies to reduce EFC on the one hand. On the other hand, in order to pay for college for our daughters, we don’t have much choice but to liquidate our assets and save little in 401(k) (currently I am saving 8% and my employer matches 4%).

Can An Outsider Reduce Your EFC?

Here is the response that I sent the dad:

I can appreciate the dilemma you face. The EFC formula does rely heavily on parents’ income.

I would be very leery about any firm that promises to reduce your EFC to the $20,000 range. These sorts of firms typically suggest that families put their assets into life insurance and variable annuities, which are expensive investments that can create their own financial nightmares. These firms typically use college as a lead generator for annuities and insurance for all a family’s assets. I guess you know that retirement accounts are not counted in EFC calculations – only taxable money.

Unfortunately, it’s difficult to reduce an EFC except at the margins. One  resource that I would suggest would be TuitionCoach. After using its EFC calculator, you can play with your own figures and see how you might be able to shrink your EFC. I don’t know of any other EFC calculator that provides this service.

For those who have a high EFC, I suggest looking for schools that would provide merit money. Nearly all schools, except the most elite, give affluent students merits money. Your daughter can increase her chances of getting top merit awards by being the very best student she can.

Additional Reading

If you also have a high EFC, I’d suggest that you read a couple of my college blog post that I wrote during the summer:

Hiding College Funds in Life Insurance

Cutting the Cost of College for the Wealthy

Lynn O’Shaughnessy is the author of The College Solution, an Amazon bestseller and a workbook, Shrinking the Cost of College: 152 Ways to Cut the Cost of a Bachelor’s Degree. Follow her on Twitter.

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