Keep Your Income from Hurting Financial Aid Chances
By: BankingMyWay.com Staff

For college students, the amount of AGI (Adjusted Gross Income) reported by parents can greatly affect how much money is awarded in financial aid packages. Sometimes, parents make too much money to allow their children to receive need-based grants and loans from the federal government and from university funds. Here are some ways that parents can keep their income from hurting their children's chances at financial aid.

File Independently

If your child is not eligible to be claimed as a dependent on your taxes, he or she can file a FAFSA (Free Application for Federal Student Aid) without having to report your parents’ financial and tax information. However, simply not being claimed on your taxes doesn’t automatically make your child “independent” in terms of financial aid consideration. He or she must meet one or more of the following criteria:

  • Be 24 years of age or older
  • Be working on a master’s or doctorate degree
  • Be married
  • Have children who receive more than half of their support from you
  • Have dependents (other than a spouse or children) who live with you and receive more than half their support from you
  • Be an orphan or ward of the court
  • Be a past or current member of the U.S. Military
  • Attend graduate school
  • Have an order from a U.S. judge that certifies you as an emancipated minor


If they don’t meet any of these requirements, your children must still file your financial information on the FAFSA form. The government assumes that parents will bear most of the cost of their children's education, so they use the FAFSA to calculate your Expected Family Contribution, or EFC. This amount is what you and your child are capable of paying, based on an evaluation of your taxes and other living expenses. The formula used to calculate the EFC takes into account current income, assets, family size, how many members are currently enrolled in college and how close parents are to retirement age.

Special Circumstances and Appeals

When you file your FAFSA and receive your financial aid award notification, you will get your EFC as well. If this amount seems unreasonable, you must appeal the decision immediately, especially if your situation has changed dramatically (unemployment, natural disaster, medical emergency, etc.). Here are some other reasons to file an appeal based on special circumstances:

  • Divorce or legal separation (you or your child)
  • Death of a parent or spouse
  • Loss or reduction of parent income by disablement
  • Major medical expenses
  • Termination/reduction of child support or Social Security benefits


In the end, it’s most important to be honest. If you lie about your ability to pay, you can risk losing out on award money. Furthermore, the appeals process can be very helpful, as long as you can prove that your circumstances don’t allow you to cover the cost of your EFC.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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