Some high-income parents often wonder if applying for financial aid is worth their time. They are curious about the income and asset thresholds that might make their undergraduate students ineligible for financial aid when attending college full-time.
Every student should file the Free Application for Federal Student Aid (FAFSA) every year, even if he or she did not receive any other types of aid during the previous year. Questions about when a family should not apply for financial aid should be approached with caution because parents can have a tendency to underestimate eligibility for need-based aid and to overestimate eligibility for merit-based aid.
The FAFSA is a prerequisite for federal financial aid: Direct Unsubsidized Loans, Grad PLUS Loans, and Parent PLUS loans. These loans are available without regard to demonstrated financial need. Financial need is not considered in the qualification process for these federal student loans. Even a student with a high SAI will qualify for at least these loans.
- All students should complete the Free Application for Federal Student Aid (FAFSA) regardless of income level.
- Even high-income earners may qualify for some student aid programs if they take advantage of the opportunity provided by the FAFSA.
- Some schools require the FAFSA to award merit aid.
- While those with higher incomes may only qualify for federal assistance in the form of student loan, they have a chance to reduce their costs by receiving assistance through their state or school.
Financial Need and College Cost
Eligibility for many types of financial aid is generally based on the student’s demonstrated financial need. A student’s demonstrated financial need is the difference between the college’s cost of attendance (COA) and the student’s student aid index (SAI). Beginning with the 2024-2025 FAFSA cycles, there have been significant changes to the way that that Federal Pell Grants awards are determined, there are even scenarios where students from wealthier backgrounds may qualify.
While there are strict rules on how to determine eligibility for federal student aid, the criteria for state and institutional aid may not be the same. Some schools may require a student to submit a FAFSA to be offer merit aid awards, which are not need-based programs. Unless you plan to pay for college 100% out-of-pocket, you should consider filing the FAFSA.
Impact of Number in College on Aid Eligibility
Beginning with the 2024-2025 FAFSA cycle, the "sibling discount" no longer exist. When you complete your FAFSA, you are asked to list the members of your household and identify if any of your siblings are enrolled at-least half-time in an accredited college at the same time. When this was an option, your expected family contribution, EFC, calculation would be affected. However, when the SAI was introduced, this was eliminated.
While the SAI calculation no longer considers this information, that doesn't mean that you can't discuss your situation with your school. You can ask your school to make a professional judgement decision to change your SAI or cost of attendance to help you qualify for additional financial aid. A professional judgement will be granted or denied at the discretion of your school, and their decision is final. There is no requirement that they make any changes to your financial aid award.
Income Cutoffs on Eligibility for Federal, State and Institutional Grants
Student aid programs generally do not have explicit income limits on eligibility. In most cases, the eligibility is based on demonstrated financial need based on your SAI.
When it comes to the Federal Pell Grant, there are some considerations which can help you determine if you will be eligible for some sort of aid from the Pell Grant program. Starting in the 2024-2025 FAFSA cycle, the determination if you qualify for maximum award or the minimum award will depend on a few factors.
- The federal poverty guidelines by state and family size.
- Dependent students, the adjusted gross income of your parent or parents.
- For a dependent student, if the income being considered is of a single parent or not.
- Independent students, the adjusted gross income of you, and if applicable, your spouse.
- For an independent student, if the student is married or single, and if the student has children.
The Congressional Budget Office (CBO) is estimating that 5.94 million students will receive a Federal Pell Grant in 2024. For the 2024 - 2025 award year (July 1, 2024, to June 30, 2025), the maximum Pell grant an undergraduate student can receive is $7,395.
In addition to the income considerations, other factors, such as enrollment status, cost of your program, other financial offered, could affect your eligibility for Federal Pell Grant funds. However, there may be other types of grant opportunities at your school. If your school participates in the Federal Supplemental Education Opportunity Grant (FSEOG), which is offered to student with exceptional need at participating schools.
How Much Income is Too Much Income?
If your parents have an adjusted gross income of more than $350,000 a year, have more than $1 million in reportable net assets, have only one child in college and that child is enrolled at a public college, and they have no issue paying out of pocket, then you may not need to file the FAFSA.
If you want to receive federal student loans, you should file the FAFSA every year regardless of your or your parents income and assets.
If the student is expecting to receive merit aid, it's important to review the school's financial aid policies. Some schools will require a student to complete a FAFSA for merit aid.