Will having a summer job hurt a student’s chances for financial aid?
That’s a question that a lot of families wonder about. Today I’m sharing a guest post from Kenneth O’Connor, who is director of student advocacy at CUStudentLoans.org, which is an umbrella organization of credit unions that offer college loans. His post will answer the jobs question.
If you’d like to read even more on this topic, I wrote this post recently for my CBS MoneyWatch blog: Can a Summer Job Hurt a College Student’s Financial Aid Chances?
By Kenneth O’Connor
Student income does factor into financial aid eligibility. Most students are completely unaware that their personal income and assets are weighed more heavily than parents income and assets on the Free Application for Federal Student Aid or FAFSA. Here is what you need to know about student jobs and financial aid:
Student income counts on the FAFSA.
This is a tough fact to deal with, especially when students are looking to earn extra money. The FAFSA already accounts for parent income substantially, but it also weighs student income as high as 50% towards the estimated family contribution.
If parents have low income, student earnings can have a major impact on financial aid.
As crazy as it sounds, earning money can hurt a student’s chances of receiving financial aid. However, if the parents have income high enough to eliminate financial aid eligibility, it will not make a difference if the student works or not.
This article is not meant to discourage anyone from work, but rather to understand how student income can affect financial aid eligibility. Students from low income households need to know how best to manage the limited financial aid made available, especially during tough economic times.
Know the “income protection” cutoff.
The Department of Education recognizes the dilemma facing students from low-income households. If they work and earn income, it could be disproportionately weighed against financial aid eligibility. As a result, the FAFSA has set up an “income protection allowance”. This allowance shields a portion of income from the financial needs analysis, and is not counted towards the expected family contribution or EFC. However, any income earned beyond the income protection threshold is counted towards the EFC at a substantial percentage.
For the 2013-2014 academic year, the FAFSA’s income protection for dependent undergraduate students is $6,130 from 2012 earnings. (Source: Page 14, line 39 Dept of Ed EFC Calculation Guide)
So if you are starting college this fall, it’s too late to adjust any earnings from the 2012 tax year, however summer 2013 earnings will impact the 2014-2015 academic year FAFSA, and this number is expected to be slightly more than $6,130.
The 2013-2014 EFC Formula Guide is available online, and provides the equations used by financial aid administrators to determine the Expected Family Contribution (EFC). It clearly states that the dependent student income protection allowance is $6,130, meaning that earnings below this number will not harm financial aid eligibility, but any earnings above that amount may weigh heavily against financial aid eligibility.
An ideal summer job situation would earn income just to meet the $6,130 income allowance benefit and no more. Students need to be aware of their earnings and plan accordingly. As long as earnings remain below the cutoff, the student is safe.
Does Work Study Jobs Impact Financial Aid?
Does work study jobs hurt financial aid chances? The good news is that these campus jobs don’t jeopardize financial aid. The money you earn in a work-study job is not included on the FAFSA. Students can’t qualify for campus work-study jobs unless they qualify for need-based aid. A student won’t have any chance at one of these jobs without completing the FAFSA.
Because work-study jobs aren’t counted and students can earn up to $6,130 during the year, most students don’t have to worry about ruining their financial aid chances by working.