<p>Ugh...even if I get into USC, I (like many of you, I'm sure) can't possibly go there without some kind of financial aid. How generous is USC with their aid packages? My FAFSA report estimates my family contribution at around $18K per year, but my CSS Profile shows that my parents own the house (read: we owe NOTHING on the house, whereas most families have mortgages). So chance me...will I get aid?</p>
<p>If your parents file 1040EZ, assets maybe excluded.</p>
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Before we begin discussing the components of taxable income, it is important to understand that even the decision as to which tax form to file (1040 long form vs. the 1040EZ or the 1040A) can have a significant impact on your eligibility for financial aid.</p>
<p>Not All Tax Returns Are Created Equal
By filing one of the short forms, and meeting certain other requirements, you may be able to have all of your assets excluded from the federal financial aid formulas, which could qualify you for increased federal aid. This is a relatively new middle class financial aid loophole known as the "Simplified Needs Test." Here's the way it works: If the parents have adjusted gross income below $50,000, have income earned from work (i.e. wages reported on a W-2) below $50,000, and everyone in your family who must file a tax return uses the 1040EZ or the 1040A form (or doesn't file at all) then all your family's assets will be excluded from the federal financial aid formulas. This means that eligibility for the Pell Grant and the subsidized Stafford loans will be determined without regard to how much money you have in the bank or your brokerage accounts.</p>
<p>It can also be vital to parents with large assets, but little real earned income. You can have $49,999 of interest income, and still possibly meet the simplified needs test -- in which case even assets of several million dollars will not be used in calculating your EFC. This can be particularly vital to parents with income below $40,000 but who have significant assets because they now may be able to qualify for the Pell Grant, which is free money that does not have to be paid back. Of course, many colleges use the institutional methodology (which does not utilize the simplified needs test) in awarding their own grant money. They may also insist that assets be used to determine eligibility for certain federally funded campus-based aid programs</p>