Gap year to earn money doesn't always (often?) make financial sense?

Paying for College
1

What I once thought was a promising avenue appears less so. Can folks tell me whether I have an accurate understanding of the implications?

Scenario 1. Parents have an EFC of $30,000, and can and will pay “only” that. Student wants to go to School A, which would cost $55,000. After aid award there’s still an unmet need of $10,000. Student earns $15,000 during gap year, so s/he is all set. Gap year = good idea.

Scenario 2. Parents have an EFC of $30,000, but can only pay $15,000. Student wants to go to School B, which costs $22,000. Student needs to make up the $7,000 difference, but s/he won’t get it from the school, as the total cost is already lower than the EFC. Student earns $15,000 during gap year. Gap year = good idea.

Scenario 3. Parents have an EFC of $30,000, but can pay only $25,000. Student wants to go to School C, which costs $35,000. Student earns $15,000 during gap year, but student earnings drive up EFC to offset most/much of what was earned during the gap year. Gap year = bad idea.

Assume all of these scenarios involve admissions match-level schools, so no stacked merit-based aid. Even the “good idea” scenarios 1 and 2, strike me as ultimately bad ideas, because there will be little/no impact beyond freshman year, so how will the subsequent years be affordable?

I’m having a hard time envisioning many scenarios where a gap year primarily to earn money will have the desired outcome of making college more affordable. Is my thinking correct here, or am I missing something? Thanks.

2

Schools don’t guarantee to meet need based on FAFSA EFC.

3

In scenarios 1 and 2, how is the student bridging the gap for years 2, 3, and 4? I think student earnings above $6k are assessed at 20%, so the student contribution for those years would likely be higher.

4

@Madison85 The post didn’t mention anything about guarantees of full need being met.

@austinmshauri Yes, that’s exactly what I’m asking.

5

I think you have to have a plan for all 4 years going in. If a school costs more than the parent contribution, + merit aid, + need based aid, + state/federal grants, + student summer earnings, + federal student loans, then school is unaffordable for us.

6

Student assets are assessed at 20 pct. I beleive income is at 50 pct after income protection allowance of 6,000.

And yeah, fafsa EFC just determines fed aid. The college will calculate the parent and student contributions with their own formula.

For full pay families, working helps. For student savings, 529 helps, maybe, I am not sure all colleges assess it at parent savings rate.

7

Thanks for the clarification, @BrownParent.

8

I think in all three scenarios the student’s income in the gap year will drive up the EFC, at least for year 1 and probably year 2 if student graduates from h.s. and then works 6 months in tax year 1 and 6 months in tax year 2 before starting college.

It is ridiculous that it works that way since the government wants the students to work and save, but that is how it works.

9

even if the child earns enough from Gap year to help for ONE year, what about the other years?

10

It does not always make financial sense. The times that it does, is when a family has a one time uptick in income that the schools refuse to let go through professional judgement, which makes a difference in financial aid. I have a friend who was caught in that situation. With two kids in college, it meant a $70K or so difference over 4 years. He had gotten an early retirement payout that he parlayed into the start of a business. The kids worked at that new family business that year, and got expected fin aid packages the next year (both went to full need met schools) and it worked out fine, very well, in fact.

It can also make a difference if it means two kids in college at the same time for an extra year, and for those who are not getting financial aid anyways. Though earnings over $6K on part of the student will be assessed at 50% on FAFSA, there is no reason why a student should let savings sit in his/her own name to be hit 20% on them. Pay parents for living expenses or give them the money, put in a 529, pay off family expenses.

An extra $5-6K can also help out on the seed money that one needs to get started in going to school. For those who don;t qualify for need, it can help too.