The Free Application for Federal Student Aid -- FAFSA -- is the primary form used by colleges and universities to determine eligibility for tuition assistance. It's required for any school that awards any federal aid, but most colleges and universities use FAFSA as their sole application for any type of need-based financial aid.
Use for EFC
Financial information on FAFSA is used to calculate an "expected family contribution" or how much the family will be asked to pay for college expenses. The adjusted gross income limits, based on a family's personal income tax return, vary with income and the number of dependent children in the family. However, for the 2012-13 year, the family income limit for automatic aid qualification is $23,000.
A lower EFC equates to higher federal student aid eligibility. For 2012, the automatic lowest limit was scheduled to be $32,000, but Congress reduced that effective July 1, 2012. It is unknown whether it will extend past 2013. That change also eliminated subsidized loans for graduate and professional students.
Determining Aid Eligibility
The federal Department of Education encourages students to complete a FASFA electronically because of built-in edits and instructions that reduce errors. Once an EFC is calculated on the basis of FAFSA data, a student's need is determined by simply subtracting the EFC from the cost of attendance, including tuition, room and board and other expenses.
While FAFSA is the application, it is the EFC that actually determines eligibility for assistance. This takes into account income for parents and student and family size. A family income of $70,000 with two dependent children, for example, would have an EFC of $7,385. Deducting that from the $12,000 average annual cost of a four-year public college with in-state tuition would leave aid eligibility of $4.675.
Programs for FAFSA
FAFSA is the principal application for federal financial assistance programs, including Pell grants, Teacher Education Assistance for College and Higher Education, subsidized federal direct student loans and "campus-based" assistance like a work-study program. There is no charge for filing a FAFSA application.