Federal financial aid is based on Expected Family Contribution (EFC) – the dollar amount used to determine a student’s eligibility. Families must apply for each year of enrollment, starting as early as October 1 of the year before college and using income from two years earlier. The federal formula for calculating EFC considers up to 47% of parents’ income but only a maximum of 5.64% of their investments – even those earmarked specifically for college. Investments owned by grandparents or others are not factored into the formula, and withdrawals taken from those accounts in 2022 and beyond will also be excluded. Key takeaway: Saving and investing has little or no impact on federal financial aid eligibility.