Is financial aid based primarily on income or savings?

shook1 · 11-09-2008, 06:38 PM

my family's house is worth about 1million, parents make about 160k combined but their savings are low at around 8,000. do financial aid programs put this into account when deciding who needs aid?

vballmom · 11-09-2008, 07:08 PM

For FAFSA, income weighs much more heavily than assets at the level of income you're talking about. Your parents' contribution from income will be 32% of your adjusted available income that's less than $26,000, and 47% of of the amount over $26,000. Adjusted available income is income minus FICA, federal & state income tax, and minus an income protection allowance that's dependent on your older parent's age and how many children are in college. In your case, unless your parents' savings are over $55,000 or so, they won't be a factor in calculating your EFC. In plugging these numbers into an EFC calculator, I get an EFC of around $30k based on $160k gross income and one child in college.

FAFSA ignores the net equity in your family's house. CSS Profile requires that you report the net equity, but it's up to the individual college how it's used in their formulas.

swimcatsmom · 11-09-2008, 07:09 PM

FAFSA does not count the value of the primary home at all so will take into account the earnings and the savings (though there is a protected asset allowance based on number of parents and age of the older one so as low as they are they will not have an effect). However an income of $160k is high enough that you will not qualify for federal grant income though may qualify for loans depending on the cost of your school.

Some schools also use CSS profile or their own financial aid forms to award institutional aid. They do ask for the value of your primary home though each school will have their own formula for how that value will be treated.

shook1 · 11-09-2008, 07:10 PM

thanks for the help vballmom!

how do you figure all of this out? my parents are pretty old, 53 and 61. and what is EFC? would you say someone in my situation would be wasting their time applying for financial aid?

thumper1 · 11-09-2008, 07:24 PM

>>my parents are pretty old, 53 and 61. and what is EFC? would you say someone in my situation would be wasting their time applying for financial aid?>>

Well...Your parents are about the same age as many parents of college students. The 53 year old parent is probably the average age of a college student's parent. 61 is closer to retirement...and that will factor into the EFC calculation on the FAFSA.

EFC is your Expected Family Contribution. This is a calculation done with the information submitted on the FAFSA form. It is based on income and assets (not primary home...but it does take into account any other real estate your family might own). This is primarily used for federal funds...but MANY schools use the information on the FAFSA to determine the awarding of all monies including institutional money (e.g. U of San Diego uses only the FAFSA...but it does award institutional money as well as federal money).

Schools that use the Profile ask for more financial information from the families, and these schools use that information to determine how they will award their institutional monies.

Now...regarding "wasting their time applying for financial aid"...you should apply. In my opinion, EVERYONE should apply for financial aid. The bottom line is that you may not qualify for much aid right now (I'm guessing this would be especially true for Profile schools that would also count your home equity in the mix for the most part)...but if your family financial situation changes, you will have to have these forms on file if you want the school to reconsider your financial aid situation during the school year. We all hope we won't be the ones with a catastrophic financial burden during the school year. But this can happen to anyone. If your family financial situation changes, you will want the school to be able to reevaluate your financial aid situation. You will be required to fill out these forms and then document the changes in your income situation. The last thing you will want to do if there is a financial catastrophe in your family is do these forms. Do them now.

At the very least, you would qualify for a Stafford Loan (unsubsidized) which is a loan in the student name.

vballmom · 11-09-2008, 08:17 PM

Here's a calculator you can use to calculate your EFC:
FinAid | Calculators | Expected Family Contribution (EFC) and Financial Aid

I agree with thumper1, you're not wasting your time applying for financial aid, especially if your father is contemplating an early retirement and his income drops as a result.

shook1 · 11-09-2008, 09:50 PM

he might be retiring very soon actually.. unfortunately my mom is the one who makes the money, she makes about 135k

thumper1 · 11-09-2008, 10:03 PM

I would hope that your dad will have some retirement income as well (to add to your mom's earnings). Apply for aid and see what happens. Nothing ventured...nothing gained. Have you had a candid conversation with your parents yet about college costs? If not, you should try to do so. They may have a plan for paying for a portion of your college expenses that you don't know about. Or they may not. It would be good to know their financial plan for college...if there is one.