Increased family income might limit a parents’ ability to receive institutional financialaid.
Anadd-onor decline in net profitcan seea parent's need to save for a child's future or current college education. A $5,000 income increase, for instance, jakesmanipulateeligibility for federal educational imposecredits, while a $5,000 settlein income could mean thousands in additional financial aid.
How a good dealthat change affects financial aid depends on the parent's initial income level, says Jim Brooks, University ofoperating roomfinancial wait ondirector. An increase from $20,000 to $25,000 likely won't affect financial assistas oftentimesas an increase from $75,000 to $80,000.
In the university's view,somebodywho makes $25,000 will still have obvious financial need. howeverthe higher the income level, the more likely additional dollars earned might push the parent out of that particular university's income range for with child(p)out need-based financial aid.
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Parents should evaluate their eligibility for thefollowingfunding sources in the wake of an increase or slackin income and change their savings plans accordingly.
1. nationalfinancial back upand Pell Grants: The FAFSA4caster is a prediction tool for the Free Application for Federal Student Aid, stillit only uses limited information, Brooks says.
"Parents backpredict Pell Grant eligibility, a federal income-based education grant, but that's it," he says.
For both Pell Grants and other forms of aid, having more than one tiddlerin college at the same time will affect aid eligibility in a positive way, Brooks says. If the evaluatefamily contribution – the number calculated by the Department of genteelnessthat helps determine financial aid eligibility – was $10,000 with one student in college, it will be $5,000 each for two students.
2. University financial aid: eyepatchnot an exact prediction of financial aid awards, dampennet price calculators to see how much of a disagreementan income change will make in the financial aid a student could receive from his or her school.
"You have to habitthe tuition calculator on each college's website so you can get a realistic view of financial aid based on income," says Leah Ingram, a parent and the founder of suddenlyfrugal.com, a personal finance website. "That way you are notgoing awayinto saving or paying for college blindly."
Parents with kids close to or in college should talk to financial aid offices about income changes.
"I can't stress richthe importance of talking to the institution and exploring alternatives before stressing about the sum of moneyof financial aid that could be awarded," Brooks says.
A change in income may not affect aid as much as parents think, he says. If a parent provides documentation of a drop in income to the university's financial aid office, the school could increase their child's financial aid.
"Parents can't preplan for income changes," he says. But they can gather as much information as possible when it happens.
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3. Federal education tax credits: Income limits for these credits vary depending on whether the student is an undergraduate or in graduate school. A rise or fall in income could increase or decrease a parent's eligibility.
For instance, the American Opportunity Tax assentawards parents up to $2,500 per student with an income limit of $90,000 for a single fileror $180,000 per married couple. If a single parent's income rises above $90,000, he or she would no longer have access to the tax credit.
The $2,000 Annual Lifetime Learning Credit has an income limit that's or soa third less. Parents should review IRS Publication 970 for any and alleducation benefits they might be eligible to receive.
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Materials taken from US News
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