If you are planning to go to college – or have a child who will soon be heading to college – you will likely be hoping to get some type of financial aid. It’s important to understand the major factors that will determine your eligibility for aid.
Financial aid eligibility – and the amount of aid you will receive – is determined mainly by your EFC. Your EFC is your Expected Family Contribution. This number is critical in determining your financial aid, or whether you get any at all. It’s important to know what factors are considered in the formula to determine your EFC. (Note: we are focusing mainly on the EFC calculated by the FAFSA. Many schools also use other forms to determine financial aid eligibility.)
1. Marital status
Marital status plays a major role in determining a student’s EFC. A simple change in this status can greatly affect your EFC, and thus your chances for financial aid. If you are divorced, it may be smart to focus on schools that only use FAFSA. This is because FAFSA only counts the income/assets of the parent with whom the student lived with the majority of the time.
Many divorced couples I know will simply designate the lower-earning parent for this role, thus making the other parent’s earnings irrelevant. This is why it isn’t uncommon for a student’s FAFSA parent to change from to year to year, depending on which parent earned less.
Important: You file according to your status at the time you submit your application. If you’ve just gotten married, you need to submit your new spouse’s financial information, even if you weren’t married during the previous calendar year. If you are about to marry someone with significant income or assets, it might be beneficial to submit your FAFSA before you tie the knot.
It’s important to remember that dependency status for financial aid purposes has nothing to do with tax-related dependent status. It doesn’t matter whether or not you claim your child as a dependent on your taxes. Unless they meet the criteria for independent student status, they are still considered your dependent for financial aid purposes – even if they don’t actually live with you.
You can visit FAFSA.gov to review the latest specifics regarding dependency status, but in order to be considered independent, a student must fall into a few certain categories, such as being at least age 24, married, supporting children or other dependents of their own, a member of the military, or have been officially homeless or in foster care.
Aside from those situations, a student is considered dependent, meaning their parents(s)’ financial information will be considered.
This is an obvious one. Here’s one of the craziest things about financial aid: you can often feel like you’re caught in a Catch-22: if you do manage to save money for your child’s education, it will then be counted against you for financial aid purposes. But if you don’t save anything, you most likely won’t get as much financial aid as you hope, and then you’ll have no savings to use to pay the bill. As crazy as it sounds, depending on your situation, you may actually be better off keeping your income lower in order to stay within the eligibility limits for financial aid.
Keep in mind, for a dependent student, the student’s income is weighted more heavily than that of their parents.
With the FAFSA, your principal residence is not counted as an asset. So, in the eyes of the FAFSA folks, my fixer-upper is viewed the same way as a McMansion in a gated community. (Other financial aid forms such as the CSS Profile do consider information about your primary home, however.) Family-owned businesses are not considered an asset by FAFSA, either. Same thing goes for retirement plans.
5 Household size and number of college students
Your household size includes all children who receive more than half of their support from you (or the student). They do not necessarily need to live in your home. Foster children are not counted as part of the household size. Any other people who live in the house and receive at least half of their support from the student/parents would also be counted (say, a grandparent).
The number of college students in the household also has a big impact on the EFC. Having more kids in college increases the amount of aid each is entitled to. A student’s parent(s) aren’t included in the number of college students in the household, however, even if they are indeed full-time college students.
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Want to learn what it’s really like to try and pay for college on a blue collar budget? Read this dramatic, first-person story detailing the challenges and struggles Bobbi Dempsey faced as she tried to put three children through school on a working-class income, with little resources and a background of poverty. Check out the new ebook, Degrees of Desperation: The Working Class Struggle to Pay for College.
And check back on BrokeParents.com frequently for more updates and advice on paying for college and living on a budget.