Beginning in January of their child’s senior year in high school and into spring, parents of college bound high school seniors embark on a fateful journey.  These travelers are afflicted by a sense of urgency, sweaty palms, incessant reviewing of financial statements, and a never ending state of confusion. If you listen closely, you can hear them muttering things like, “You’ve got to be kidding,” “How in the world do they expect me to do this,” or, most commonly, a steady stream of profanities not suitable for print.

I encourage you to give them wide passage. For you see, they’ve just boarded the Crazy Train of college financial aid known as the Expected Family Contribution, or EFC. This is where the fantasy of chasing all those scholarships and claiming all that “unused” money to assist with funding their child’s education vanishes and they realize they’re on a bullet train bound for Debt City.

There may be no other term used in college financial aid that is so frequently misunderstood. I have heard colleagues refer to this as “the eventual family confusion” or “your college tax liability.” Both are highly appropriate.

In order to participate in the financial aid system through funds supplied by either the federal or state governments and the college or university your child will be attending, an accounting of your financials is required. If your child will be attending a public university, this information is captured on the Free Application for Federal Student Aid (FAFSA). If your child will be attending a private institution then you’re also required to send in the Profile form.

Once this information is captured, it is entered into two distinct formulas based upon the application that was received. If you applied with the FAFSA, then the formula used in assessing your financials is known as the Federal Methodology, or FM. On the other hand, if you are also required to complete the Profile form, this formula is known as the Institutional Methodology, or IM.

If you’re one of the weary travelers described above, you may have already guessed that your financials are assessed differently depending upon the methodology used. The one thing they have in common is that they are designed to determine your initial level of financial participation known as your Expected Family Contribution. It is at this point that you, and parents all across America, board that train destined for Debt City from the station called Point Confusion.

Focusing just on the FAFSA application process, once the FAFSA is filed, parents receive a report referred to as the Student Aid Report, or SAR. This report summarizes all of the data collected on the FAFSA and calculates the family’s EFC. It is at this point that most families swallow hard, yet come to grips with the dollar amount of the EFC in this report.

Mistakenly, more than a few believe this to be their cost of college. Unfortunately, the ride is just beginning.

The SAR report is also sent to the colleges that your child is considering attending. Once the Financial Aid Offices of the respective colleges receive this report, aid packages may be designed based upon the school’s Cost of Attendance (COA) minus your EFC as shown on your Student Aid Report. If this number is negative or zero, no aid will be considered. If the difference between your COA and EFC is positive, this is referred to as need and your child is considered for financial aid.

Depending upon a multitude of factors, including the desirability of your student, 100 percent of your need could be met or none at all. Most colleges fill need with a combination of gift aid, work study, grants, tuition discounts or preferred loans. If, after all financial aid is applied, you are still left with a balance; this is referred to as unmet need or gap.

In order to determine your true cost of college before you derail your family finances, simply take the school’s Cost of Attendance and subtract any free money such as gift aid, grants or scholarships. This will show you your true Expected Family Contribution. Once that calculation is complete, so is your journey on the Crazy Train of college financial aid – final destination: Debt City, where the reality of the high cost of funding a college education reigns supreme.

Next stop, parents of High School Juniors- All Aboard!