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Fly View Productions/Getty Images September 30, 2022 Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy. Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. The uses your family’s income and assets to determine much financial aid you’ll receive for school. Many families do not fill out the FAFSA, assuming that their income will disqualify them for any aid. But even if your family has a good amount of both income and assets, there are ways you can maximize your federal financial aid. What income is counted on the FAFSA
Both student and parent income counts on the FAFSA — meaning if you have a job as a student, you’ll need to report your earnings for the previous tax year on your upcoming FAFSA application. Your parents’ income is all their earnings from work that’s reported on their taxes. That’s why the most recent tax filings are so important: They detail the latest earnings and can give you the most accurate estimate of your family’s situation. Retirement withdrawals, capital gains and some taxable scholarships may also be reported as income. What assets are counted on the FAFSA
Assets are what either the student or the parent owns that could be collateral to help pay for college. This includes investments from rental properties, investment accounts, college savings plans and a business. Assets that aren’t included are the family’s primary residence, cars and other possessions. How do income and assets affect your financial aid eligibility
Income and assets are the some of the primary metrics on which the FAFSA measures your financial need. If your family has a high relative income, you may receive less financial aid than a family with a relatively low income, because the FAFSA will determine that you have a higher expected family contribution (EFC). However, the cost of your school also affects your . Your financial need is calculated by subtracting your EFC from the school’s cost of attendance, so if you’re attending an expensive school, you may receive financial aid even if your family income is high. Parent vs student income and assets
What parents claim as assets and what students claim as assets are different. For instance, a 529 account counts as assets of the owner (not the student beneficiary), while UGMA and UTMA accounts are considered student assets, since the minor is the owner of the account. Student income and assets generally have a greater effect on EFC than parent income and assets. This is why recommends transferring as many assets as possible from the child’s name to the parents’ before beginning the FAFSA. What happens if you have a low income but high assets
Income is more heavily weighted than assets on the FAFSA, meaning you may still qualify for financial aid if your family has a low income but high assets. This is true even if your family lives in an expensive home — primary residences are not considered assets for the purposes of the FAFSA. How to maximize your financial aid eligibility
It’s important to configure income, assets, savings and other financial college preparation into the right places so you can still maximize how much you receive in federal financial aid. You can do this by: Moving your assets to nonreportable asset accounts. If you have any accounts that are considered reportable assets, you may want to move them into nonreportable asset accounts. For instance, if you have a 529 college savings plan, you could move those funds into a Roth IRA. Completing the FAFSA as soon as possible. The FAFSA starts accepting applications on Oct. 1 every year for the following year. Since some need-based aid goes out on a first-come, first-served basis, you could get more aid the sooner you apply. SHARE: Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy. Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans.