Are you wondering, “what is the income limit for FAFSA?”. Are you curious to find out just how much financial aid you may qualify for? There are so many different factors that go into determining just how much you are eligible for.
If you want to learn more about the FAFSA and what you need to do to qualify for aid, you came to the right place. This brief article will go over FAFSA income limits and what you need to do to make sure you have what you need to succeed in college!
What Is the Income Limit for FAFSA?
What is the income limit for FAFSA? There is no limit! The main reason there is no income limit to apply for financial aid is that the whole financial assistance process is quite complex.
Every college calculates your financial assistance according to their own unique formula created specifically for their institution. This means that your financial aid package will look different for each college you send your financial information to.
Colleges look at your family’s financial situation through your FAFSA, also known as Free Application for Federal Student Aid. Financial aid formulas use several different points of data in addition to your family’s income.
These other data points include your family size, the number of college students in your home, your own income and assets, and your family’s assets. This data information will determine your family’s Estimated Family Contribution, which is the amount of money your parents are to pay for your college expenses.
What Is the FAFSA?
The FAFSA is an application form that college students fill out when they want to see what type of financial aid they qualify for. The FAFSA asks for information about your family’s assets, income, and liabilities to produce your Expected Family Contribution (EFC).
The EFC is an estimate of what a typical family similar to your financial circumstances could afford to pay to help with your college expenses. This EFC number is then deducted from your total cost of attendance at the school of your choice.
The gap between those two numbers is considered to be your “financial aid.” Scholarships and student loans should be able to fill the gaps between the cost of attendance and your family’s expected contribution.
Starting in January of 2022, the FAFSA will no longer use the term Expected Family Contribution.
Instead, they will use the term Student Aid Index to demonstrate that the FAFSA system is an index for determining and distributing funds. FAFSA wants to highlight that the system does not reflect or should not reflect what a family can or can not pay for your education.
Major Types of Financial Aid
There are three major types of financial aid available for you to use. There are need-based grants, merit scholarships, and student loans.
Student Loans
Student loans are typically provided to you by the federal government or private institutions, such as Sallie Mae, or loans from your bank.
You will need to repay these loans when you graduate college, drop out of college, or drop below half time status. Before you take any private loans or federal student loans, make sure that you review the interest rates to ensure that you aren’t paying back a lot in interest.
Need-Based Grants
Need-based grants are grants you receive based on your financial needs. If your family meets specific financial criteria, you may receive a Pell Grant or other need-based grants from your college if they offer them. Unlike loans, you will not need to pay this money back.
Merit Scholarships
Merit scholarships are scholarships you can receive based on your academic achievements.
If you have high test scores or you are at the top of your graduating class, a college may offer you a merit scholarship. If you are an athlete and a school wishes to recruit you, they may provide you with a scholarship to attend their institution.
Should I Apply for Financial Aid?
Yes, you should always apply for financial aid even if you don’t think you qualify. The worst-case scenario is that you won’t be eligible for financial aid. Nothing negative happens to you if you do not qualify.
Make sure that you apply every year that you are in school to see what you are eligible for. If you are under the age of 25, you are considered a dependent, so your parent’s income is one of the defining factors if you receive aid.
If your family situation changes, such as if your parents lose their job, you may qualify for more assistance. Make sure you always apply even if you think your parents make too much.
You May Miss Out on Federal Loans
If you wait too long to apply for FAFSA, you may miss out on federal student loans. These loans tend to have more favorable payback options and lower interest rates than private loans.
Why Should I Apply Every Year?
As mentioned earlier, you should apply for financial aid every year, regardless of your parent’s financial situation or your financial situation.
For example, a student who enrolls at a higher-cost college may qualify for financial aid, but they may not be eligible for a low-cost college such as an in-state college. Again, every college has its own calculation they use to offer scholarships and financial aid. Make sure you always apply to see what options you have.
When Shouldn’t I Apply?
Sometimes our parents say they have enough money to pay for your college when they don’t. It is best to apply for financial aid, just even to have a cushion if your parents pull out last minute.
Unless your family is entirely able to comfortably pay for the total cost of your tuition and other college expenses without any concerns, you should apply for financial aid.
Some families have 529 accounts for their children, which they use to pay for their college expenses. If your family is making a significant donation to your school or donating a building, you most likely won’t have to worry about paying for school.
Common income counted
Colleges and universities that use the Free Application for Federal Student Aid allocate about 50% of the student’s eligible income to cover the college expenses and about 22% to 47% of their parent’s income as well. If your parents are no longer together and your primary parent has remarried, FAFSA may ask for your step-parent’s information.
Common sources of income counted:
- Retirement fund withdrawals
- Proceeds from dividends
- Proceeds from capital gains and asset sales
- Income from work
- Untaxed income
Make sure that you review your FAFSA application with your colleges of choice to see which school offers you what. One school may be able to provide you with more than the other, depending on the information on your application.
Common Income Not Counted
There is some income that parents and students earn that is protected to allow for minimal living expenses and to pay federal and state taxes. This income protection amount changes each year, so make sure you review the federal government student loan allowances each year you apply.
Currently, FAFSA protects up to $6,600 of students’ income if they depend on their parents. For parents, the amount of money protected depends on the number of students in the household in college and the overall number of people living at home. The income protection allowance for a family with two children in college is about $25,000.
Common sources of uncounted income:
- Potions of money paid for student loan interest
- Money paid for student’s tuition and fees
- Withdrawals from a 529 college plan
- Financial aid grants
- Financial aid scholarships
- Loan proceeds
There are certain conditions where income does not apply. For example, a family must have no more than $26,000 a year in income, and they must file a 1040A or 1040EZ form.
The family must also have received some form of federal benefit over the past two years. If your family meets this requirement, FAFSA and your school may not consider any income when determining your financial aid package amount.
Why Aren’t There Income Limits?
As mentioned, there are no income limits when filling out the FAFSA because the FAFSA determines your needs based on your own personal “financial needs.” Your individual financial need is determined by the cost of attendance of your school of choice minus your family’s expected contribution.
For example, if you only need $7,000 a year, you won’t receive more than $7,000 in any need-based financial aid. The FAFSA doesn’t only determine your need-based assistance; it also determines your need for scholarships.
For example, Pell Grants help students whose families EFC is much higher than $5,846. If your family’s income is less than $50,000 a year, you may qualify for this grant.
Keep in mind that these grants are also awarded on a first-come, first-serve basis. Make sure that you apply for financial aid as soon as you can to reap the best possible assistance for yourself.
Am I Financially Independent?
Although the FAFSA depends on your family’s financial situation, there are times when they will not count.
As mentioned earlier, if your family makes less than $26,000 a year, you won’t have to count their income. If you are already financially independent from your family and their income, you can count as financially independent through FAFSA.
Possible situations that qualify you as financially independent:
- You are over 24 years old
- You have dependent children
- You are legally married
- You are on active duty in the military
- You are homeless
- You’ve been in foster care since 13 years old
- You are an emancipated minor
These circumstances are not as clear-cut and can be very complex to determine. Ensure that you disclose all the information that FAFSA requests to you to ensure you receive an accurate financial package.
What You’ll Need to Apply
You can submit your FAFSA online, and the process is relatively easy. You will want to gather your personal information and your parent’s personal information before starting.
What you will need:
- FSA ID to sign electronically
- Family income tax returns
- Social Security Number
- Alien registration number (if applicable)
- Bank statements
- Records of investments
The application form will ask you to input the information from these forms onto the website. You may not need to upload any additional documents at the time, but if they need to investigate your application further, they will ask for it.
When to Apply for FAFSA
It is best to apply for FAFSA when you receive your admission letter from your schools of choice. As mentioned earlier, the aid amount you receive depends on your school’s cost of admission. Since every school calculates its aid differently, it is best to wait until you have your admission letter before you apply.
You can add up to 10 different colleges or universities to your FAFSA application. Once your schools receive your FAFSA information, they will create your personalized financial aid package, including any federal aid you may receive. If you need to add or remove any schools from your FAFSA, you can go back and edit it at any time.
Apply for Aid Today!
Now that you know the answer to “what is the income limit for FAFSA?” it is time for you to start applying! Although there is no income limit to apply, keep in mind that your financial situation and status determine how much aid you need and qualify for.
If you ever need help with filling out your application, your college and universities should have staff on-site to help you with the process. If not, you can always reach out to FAFSA for additional help. If you need help with other college tips and tricks, check out our blog for other helpful information to ensure your success in college.