As a college student, your income directly affects your financial aid, as it is used to calculate the amount of federal financial assistance you are eligible for. But how does that work exactly? Here’s what you need to know.
Why Does My Income Affect My Financial Aid?
When completing the FAFSA (Free Application for Federal Student Aid), you provide financial information including your earned income. “The student’s income is part of the calculation used to determine the family’s ability to pay,” according to Dana Kelly, Vice President of Professional Development for the National Association of Student Financial Aid Administrators. Your income, savings, and reported assets on the FAFSA are used to calculate your expected family contribution, or EFC.
How Does Student Income Affect Financial Aid?
Not all of your income as a student will count towards your EFC. Students report income from the previous year before starting the academic year instead of the current year. For example, students report their adjusted gross income (AGI) from 2021 on the FAFSA. You can find your AGI on Form 1040.
The EFC formula includes an income protection allowance that excludes a certain amount of your earnings from being used for college costs. This allowance for the 2023-2024 academic year is $7,600 for dependent students and $11,820 for independent single students.
Once allowances are applied to your income, the remaining amount is considered “available income.” According to the EFC formula, 50% of a student’s available income is expected to be allocated to cover your educational expenses.
How to Increase Financial Aid Based on Your Job
Working while studying in college is a smart way to help cover your costs. However, you should be aware that the impact of your income on federal student financial aid can depend on the type of job you have.
Summer Job or Internship
These types of jobs may not impact your financial aid. Earnings from a summer job, internship, or part-time job may fall within the income protection allowance – $7,600 for dependent students or $11,820 for independent students for the 2023-2024 academic year. Some students may earn more, of course, so remember that income exceeding this amount can affect your eligibility for financial aid.
Working Under a Federal Work-Study Program
One form of federal student financial aid is the Federal Work-Study Program, which subsidizes wages paid by employers for eligible students. There’s good news about this type of work too. “Earnings from the work-study program do not affect the student’s EFC or financial aid eligibility,” according to Moralee Kiler, Director of Technical Assistance for the National Network for College Success. It will also not count against your income protection allowance. You will be required to report this income on the FAFSA, but don’t worry. “Work-study earnings are deducted from [available income] in the EFC formula,” according to Kiler.
Previous Full-Time Job
A lot can happen in the year and a half between earning the income that is reported on the FAFSA and actually paying for college costs. You may have lost a full-time job this year, or you may have resigned to attend school. According to Kelly, if your current income is significantly lower than what was reported on the FAFSA, talk to your school’s financial aid office. “Those students may be eligible for a professional judgment review, which can provide additional assistance,” she said.
Current Full-Time Job
If you want to continue working full-time while enrolled in college, it’s helpful to complete the FAFSA to see what types of financial aid you might qualify for. If your full-time income disqualifies you from need-based financial aid, consider your options. You might talk to your employer about working part-time, if you think that could help you qualify for more need-based financial aid, for example. Or you could look for other ways beyond federal aid to cover college costs.
When
Your income may be too high to qualify for federal student financial aid
If your income or other factors mean you haven’t received enough student financial aid, keep trying. Look for alternative funding, such as:
- Employer assistance: Take advantage of education benefits provided by your employer, such as tuition reimbursement.
- Scholarships: Look for scholarships and grants, especially those related to your background or personal circumstances.
- Income and savings: Assess your cash flow and savings to find ways to reduce other costs and save money for college expenses.
- Student loans: Once you’ve exhausted your other options, you might consider student loans, whether federal or private. Unsubsidized loans are not need-based. “You always have the opportunity to borrow federal loans to help cover college costs,” Keller said – regardless of income.
Frequently Asked Questions
Will earning income as a student affect my eligibility for federal student financial aid?
As long as you don’t earn more than the income protection allowance ($7,600 for dependent students and $11,820 for independent students for the 2023-2024 academic year), your income will not be counted in your expected family contribution.
What is the income limit for FAFSA?
There is no income limit to apply for FAFSA. However, to receive an expected family contribution of zero, the income limit is $29,000 for the 2023-2024 academic year.
This article was updated on January 23, 2023, to correct the tax year applicants should use for income details on the 2023-24 FAFSA form.
Source: https://www.thebalancemoney.com/student-income-and-federal-student-aid-5075741
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