I was hoping to work for the entirety of this summer to have money for the school year, but I will be making a lot more than I thought so I will only work around 4-5 weeks. I found out that students can make up to $6570 in a year without losing financial aid, but I couldn’t find out if that was before or after taxes. I was hoping somebody here might know the answer.
On a side note I think it’s a little flawed for the student to be expected to use half of the amount he or she exceeds when that income was from two years prior.
It is higher than that. The income protection amout historically has went up every year.
The 2017/18 FAFSA EFC formula had an income protection amount for the dependent student of $6,420
The 2018/19 EFC formula has an income protection amount of $6.570
Also subtracted from student income are federal, state and social security taxes paid.
Work through the FAFSA EFC formula and see how much the impact would be.
What you earn this year, in 2018, will be reported on the 2020/21 FAFSA.
We don’t know what the income protection amount is going to be for that FAFSA yet.
So far the IPA seemed to be close to the standard deduction. Last year the maximum standard deduction for a dependent student for federal tax return was $6,350.
It is going to increase to up to $12,000 this year.
So I am wondering if the IPA will be increased as well.
Your FAFSA EFC for a dependent student depends first of all on parent income.
Then parent assets. And then student income and assets.
If your EFC is low enough that you are in danger of losing a Pell Grant if your EFC increases, then it makes sense to watch your income and assets to make sure they don’t increase your FAFSA EFC too much, but usually more money earned will enable you to borrow less money.
It’s not flawed. It actually benefits MOST students because most students don’t earn that much money until their junior years of college…and if that is the case, the income is never used for college financial aid purposes.
Another thing…if you have those earnings in the bank when you file a FAFSA, they will be considered an asset. And student assets are assessed at 20% of their value for calculation purposes.
But really…instead of complaining about this…why can’t you be grateful that you have these earnings to help you with college costs.
Look at page 10 of the above EFC formula PDF file for the dependent student worksheet.
It has you list AGI from tax return and income from working (gross federal wages from W2).
The total income will be used (AGI or W2 income, whichever is higher, minus any deductions like taxable scholarships reported as part of AGi or income from work study).
Then it has deductions for federal, state, social security tax, and income protection allowance.
That results in Available income, which will be much lower than total income.
If you work and earn $100 after the protection allowance, you’ll have $100 to use toward tuition. You might lose $50 in financial aid, but that’s only if you really were getting the full amount and working causes you to less in FA.