Factors affecting financial aid
Calculating available income
To calculate your available income, start with your adjusted gross income, add untaxed income, and subtract the value of certain education benefits, taxes, and income protections.
Sample worksheet
|
Adjusted gross income |
$ _______________ |
|
Untaxed income and benefits |
+ $ _______________ |
|
Education benefits, Work-Study |
– $ _______________ |
|
Scholarships counted as income |
– $ _______________ |
|
Federal taxes |
– $ _______________ |
|
State taxes |
– $ _______________ |
|
Social Security taxes |
– $ _______________ |
Remember that your available income will be calculated for you when you complete the Free Application for Federal Student Aid (FAFSA).
Calculating available income
Follow this example to learn how available income could be calculated for a typical family:
|
Adjusted gross income from tax return |
$ 58,000 |
|
Untaxed benefits from retirement income |
+ $ 3,000 |
| Untaxed benefits from tax credits |
+ $ 1,000 |
| Total income |
= $ 62,000 |
Next, the financial aid formula subtracts federal, state, and Social Security taxes. This family paid approximately $8,100 in federal income tax and $4,300 in state income tax.
Using the Social Security tax table as a guide, this family’s income bracket is 7.65% of their earned income—about $4,600 ($60,000 x 7.65% = $4,590). Subtracting these taxes, the family now shows a total income of $45,000.
| Total income |
$ 62,000 |
| Federal income taxes |
– $ 8,100 |
| State income taxes |
– $ 4,300 |
| Social Security taxes |
– $ 4,600 |
| New total income |
= $ 45,000 |
Taking income protection
This family is also allowed to take two types of income protection.
The first is based on the size of their household and the number of children who are or will be in college. This family of four with one child in college will receive an income protection amount of $21,330.
Because both parents work, they also may take an employment expense amount. Each parent earns about $30,000, so the maximum they may take is $3,000.
Altogether, they have an income protection of $24,330:
| Income protection |
$ 21,330 |
| Social Security taxes |
+ $ 3,000 |
| New income protection |
= $ 24,330 |
The financial aid formula calculates available income by taking their total income of $45,000 and subtracting the income protection of $24,330.
This family’s available income is $20,670.
| Total income |
$ 45,000 |
| Income protection |
– $ 24,330 |
| New income protection |
= $ 20,670 |
This is the income figure that enters into the calculation the government makes when determining your EFC.