Does working while in College affect EFC for a student?

<p>Hey guys! I will be a freshman at the University of Tennessee, Knoxville, TN, and I was wondering if getting a job while I am in school will hurt my financial aid for next year. My EFC is around 2500 including my parents taxes and stuff. I haven't worked before, so that EFC is without me earning anything. If I am 18 and I earn around 7000-8000 in one year, will that increase, decrease, or not affect my EFC if I am 18? If it will increase my EFC, then is there anyway to earn the money I did without having to report it on the FAFSA? I just want to earn some money while in college to help pay off loans. Thanks!</p>

<p>All money you earn has to be reported on your tax return and the FAFSA. Did you qualify for work-study?</p>

<p>It will affect the next year financial aid.</p>

<p>As a student, you can earn up to $6100 (I believe–check the limits for 2014) in the calendar year before it affects your EFC. The student EFC is calculated at 50% student income over that limit, $6100 plus 20% of all assets as of the day you complete the FAFSA. So either spend down that income by prepaying your college expenses, repay your parents for their contributions (a parent can put it in an account joint with you with parent name and ssn listed first so that it is a parental asset with an allowance and only 5.6% over that allowance affecting the EFC). Work study income and assets comprised of those proceeds (as well any money from financial aid/scholarships) do not count on the FAFSA. </p>

<p>So, yes, working in college, if you exceed the allowance, can increase your student EFC and affect the next year’s aid. </p>

<p>Thanks for fast response! Whenever you say to spend that income, do you mean that I can spend the money I earn on stuff like loans,tuition, books, etc? That is definitely what I am going to do. So if I earn like 7,200 in the school year and I put like 80% of it into student loans, book fees, etc, then will it increase my EFC then? Or would that 7200 still need to be reported even though 80% of it has gone towards the loans. I am very new to loans and stuff like this, so sorry if I sound repetetive mate. You are a very big help.</p>

<p>It has to be reported. It doesn’t matter what you spend it on for income reporting. All your income has to be reported. After the income protection amount (I think it is $6,200) then you are going to be asked to contribute half of that to school. Work study awards are excepted. </p>

<p>It is just for savings that you want to pay for stuff so that it is not in your personal account, because those are assessed at 20 to 25%.</p>

<p>Go ahead and work. You can earn about 6,000 and it wont affect your FAFSA EFC. If you earn 7000 (which is hard for a college kid to do), then 1000 of it will affect your EFC. It may increase your EFC by 500.</p>

<p>If you start working now, then by Dec 31, you will not have earned 6000, so dont sweat this. Then, as of Jan 1, then you can watch your earnings to make sure that you dont earn more than 6000. </p>

<p>If any of your earnings is from work study, then it doesnt affect your EFC.</p>

<p>If you have any savings from work study, that does not affect EFC.</p>

<p>If you have any savings from a regular job, then spend it before you file FAFSA again (pay down loans, etc) , or give it to your parents to save for you. </p>

<p>As the Mom2 and Brown parent are saying, yes, you do have to REPORT the income on FAFSA and if you owe taxes, to the IRS. You have to make about $10K with the personal exemption and standard deduction before you owe federal taxes, but if a dependent on parents tax return, and other issues, you may owe a bit in taxes, depending on what you actually make, and if you have taxes withheld and are due for a return, to get the money back you have to file. This is not a tax advice forum, and anyone should check ALL info given to you personally anyways, but I’m trying to give you a general overview of how it works for most young full time students who do work while in college. The gist of it is that there is a threshold under which a lot of students end up owing nothing in taxes, but that depends upon the amounts, and there are scenarios where you may not have to file taxes, but again, it depends on amounts and situation. It’s by calendar year, both for FAFSA and tax purposes, and as Mom2 says, it’ would be tough to have earned the amounts where it would make a big difference.</p>

<p>The day you submit your FAFSA, as a student, you should have your accounts emptied, by having prepaid school expenses, or whatever, because every dollar you report will add 20 cents directly to your EFC. If you prepay the school and they reimburse you with loan or aid money, and you keep it earmarked, you then do not have to report those balances, but money you earn , get from outside sources are assets that are tapped by the FAFSA formula, and if audited, the school can request your bank statements from that day. You do not want to fill out FAFSA on payday or when your accounts have earmarked money, and that can go for parents do. But parents do get an asset protection allowance–students do not. Parents also are only hit up 5.6% after the allowance, student get zero allowance and are hit 20% straight on.</p>

<p>But working is most always beneficial as you always will be able to pocket that first $6200 (not sure of exact dollar amount for 2014–it tends to change each year) , and half of anything over that is added to EFC. </p>

<p>If you earn $7200 in a calendar year, you will have to report it for FAFSA purposes (maybe not for tax), and regardless of how you spent it, your EFC would go up $500 ($7200 - $6200 = $1000;, $1000 x .50 = $500). If you have the money sitting in your possession the day you fill out the FAFSA, whether it’s in a box under your bed or in a checking account, you also have to report it as an asset, and are assessed 20% on that full amount, so if you spend it by then, by prepaying your college (and get a refund from the school when your aid comes through if there is an excess) or repay your parents, who may put it in a joint account to help out with next year’s expenses as I discussed above, you will then get not have to report it as an asset. If it’s spent, it’s not your asset. But the income, you have to report whether it’s reportable for taxes or not. My high schooler, for instance, does not make enough to have to report or file his summer earnings for tax purposes as he is under the threshhold for that,and has filed a withholding exemption form so that he does not have anything withheld (other than required soc security). Should he earn over that amount, he’d have to file tax returns. For FAFSA purposes, he would have to report his entire earnings, but it would not make that threshold either to be assessed anything, but they want it reported.</p>


Can you clarify this? Suppose the student earned $10100 and saved every penny of it. On the day he completes the FAFSA his income over the limit is $4000 assessed at 50% ($2000) + 20% of 10,100 = 2000 + 2020 = $4020. Is that correct? </p>

<p>Yes, it is, Sylvan. That’s why I keep emphasizing that he should spend down the money by prepaying for classes, books, other expenses, reimbursing his parents for expenses, so that he (and any other student watching for every dime of fin aid) does not get hit that 20% on student assets. He would effectively be hit twice on that money he earned. If he prepaid his school bill, and there is a credit on the account, he could get that money back from the school, it could be attributed to his PELL or other aid, and then as long as he keeps it so it is easily so traced to that source, it does not count as an asset. Financial aid (including proceeds from work study and loans) as well as scholarship money sitting there as an asset does not get assessed the 20%.</p>