IRA contribution impact on EFC

Pre-tax contributions to IRAs and 401ks are added back into your income for college financial aid purposes, so it doesn’t help there.

It will be shielded from the “asset” component of the financial aid assessment, but that is only 5.6%, which on $6k is $336.

However, financial aid calculations also take how much taxes have been paid (with more taxes being paid resulting in a lower EFC), and if you put 6k into an IRA that’s 6k less that you paid taxes on, so that will raise your EFC from what it woud have been if you hadn’t contributed that money to your IRA.

Paging @kelsmom in case I misspoke.

4 Likes