PRIVATE STUDENT LOANS
UPDATE: January 2014
Students from high need families face obstacles when it comes to college. Increasingly, one of those challenges is managing an actual work schedule while attending. For some students, getting work can be as important as school itself. Earning critical income can take as much time out of a week as attending classes.
Today, we see hard working students taking every opportunity they can to move their lives forward. They might work multiple jobs to help out with household expenses. Perhaps parents have gone unemployed or have had hours cut, leaving the student without any extra resources to fall back on. There are no easy answers for anyone, especially when the answer is “get a job, any job…”
However, income does factor into financial aid eligibility. Most students are completely unaware that their personal income and assets are weighed more heavily than parents income and assets on the free application for federal student aid (The FAFSA).
As a result, students could unknowingly sabotage their own financial aid eligibility by earning income from a part time job. The following info can help clarify student’s concerns about income and financial aid eligibility.
Student income counts on the FAFSA: This is a tough fact to deal with, especially when students are looking to earn extra money. The FAFSA already accounts for parent income substantially, but it also weighs student income as high as 50% towards the estimated family contribution.
If parents have low income, student earnings can have a major impact on financial aid: As crazy as it sounds, earning money can hurt a student’s chances of receiving financial aid. However, if the parents have income high enough to eliminate financial aid eligibility, it will not make a difference if the student works or not. This article is not meant to discourage anyone from work, but rather to understand how student income can affect financial aid eligibility. Students from low income households need to know how best to manage the limited financial aid made available, especially during tough economic times.
Know the “income protection” cutoff: The Department of Education recognizes the dilemma facing students from low income households. If they work and earn income, it could be disproportionately weighed against financial aid eligibility. As a result, the FAFSA has set up an “income protection allowance”. This allowance shields a portion of income from the financial needs analysis, and is not counted towards the expected family contribution or EFC. However, any income earned beyond the income protection threshold is counted towards the EFC at a substantial percentage.
UPDATE: The 2014-2015 FAFSA provides a student income allowance of $6,260. See page 10, line 39 of FAFSA EFC Formula Guide.
So if you are going to college this upcoming fall 2014, it’s too late to adjust any earnings from the 2013 tax year, however Summer 2014 earnings will impact the 2015-2016 academic year FAFSA, and this number is expected to be slightly more than $6,260.
For the 2013-2014 academic year, the FAFSA’s income protection for dependent undergraduate students was $6,130 from 2012 earnings. (Source: Page 14, line 39 Dept of Ed EFC Calculation Guide)
The 2014-2015 EFC Formula guide is available online, and provides the equations used by financial aid administrators to determine the Expected Family Contribution (EFC). It clearly states that the dependent student income protection allowance is $6,260, meaning that earnings below this number will not harm financial aid eligibility, but any earnings above that amount may weigh heavily against financial aid eligibility. (Also, here is the 2013-2014 EFC guide for reference.)
An ideal summer job situation would earn income just to meet the $6,260 income allowance benefit and no more. Students need to be aware of their earnings and plan accordingly. As long as earnings remain below the cutoff, the student is safe.
Work+Study = Work-study at college! Work-study, aka The FWS Program, provides funding to colleges to provide part-time campus based employment opportunities for students. Financial aid administrators have substantial flexibility in determining the amount of FWS to award to students, with awards ranging from $1,000 to as high as $4,000 per academic year. Hourly wages must not be less than the current federal minimum wage of $7.25 per hour and students work no more than 20 hours per week. Best part is, the earnings from federal work study jobs are not counted in financial aid methodology, meaning that any money made is not “counted against you” for financial aid eligibility during the next academic year. This is unlike earnings from regular non-workstudy jobs that are counted as part of income on the FAFSA.
The wise working path maximizes benefits of both: Students can feel stuck in the middle, wanting to make money, but also wanting to attend school with the best financial aid eligibility. For a student to find their own solution they must manage a combination of opportunities and recognize the limitations of both.
Summer jobs have a long tradition for college students, from waiting tables, to life guarding, to taking care of children. They are a good experience for the student along with extra income needed for expenses. For some students, part time summer work leads toward full time working opportunities as well. However, the parameters of financial aid force students to limit their earnings to retain financial aid eligibility. As stated earlier, students need to earn income up to the “income protection” limit, but no more as to avoid losing financial aid.
Learn more about Work-Study Job options: Work-study jobs are different because they are campus based. They are always affiliated with school, making it convenient to fit with a student schedule. The downside is that the options are pretty limited, mostly involving filing and organizing office materials, not the most exciting of work. The jobs can become repetitive and stagnant over time, so the real benefits of work study come from who you are working for and with. A work study position in a busy academic department is a great opportunity to meet lots of people in a particular area of study and can lead to further networking opportunities. Certain work study jobs can even be done off campus, usually assisting non-profit community groups depending on where you attend school, but this is less common.
Work-study earnings may be lower than other job earnings, but because they are not weighed against financial aid eligibility, the dollars are worth more than they seem. Students must stay patient during work study employment, but that patience can pay of by retaining financial aid eligibility. Also work-study hours are much more forgiving, with supervisors often allowing students a lot of flexibility for class and studying.
Combine the best of both worlds by accessing both summer work and work-study. Use summer jobs to gain experience outside the classroom, and keep earnings within the income threshold to retain financial aid eligibility. Use work-study during the semester to maintain some income without losing financial aid. Savvy students only need to rely on this for a few years, as they will grow up into new job opportunities, but during these important early years a bit of planning can really go a long way.
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