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Parents sometimes wonder if it’s worthwhile to file the Free Application for Federal Student Aid (FAFSA), especially if they think their income is too high for their child to qualify for need-based federal financial aid. However, there are no simple FAFSA income limits, or income cutoffs on financial aid eligibility, in part due to the complexity of financial aid formulas. We recommend that everyone fills out the FAFSA as close to the October 1st date as possible. Note, however, that the new FAFSA for the 2024-2025 school year will not become available until December 2023.
How Financial Aid Is Calculated With the FAFSA
The federal government, through the U.S. Department of Education, provides need-based financial aid through grants and guaranteed loans. You will fill out the FAFSA application in order to see if you qualify and send that application to the colleges you are attending so that they can award a potential financial aid package.
When you submit your FAFSA there are two main things that will be calculated:
- Student Aid Index: The SAI is the measure of how much your family is expected to contribute based on income and assets. The calculation will include family assets, benefits received, and untaxed income.
- Cost of Attendance: This is the total amount of money that is expected the student will need to attend college. The costs include tuition, room and board, books, supplies, and other related costs.
Financial Aid Cutoffs
There are no set income cutoffs for financial aid because of the number of factors that are included in the need-based calculation beyond income.
Unless parents are in a situation where they don’t need money for their child to go to school, everyone should fill out the FAFSA. Even if you don’t think you need money, it’s still a good idea because there is a good chance they may qualify for federal student aid or state or institutional grants. They may also qualify for low-cost federal loans and federal work-study.
Even if a college uses the CSS Profile to determine institutional aid eligibility, the student must still file the FAFSA to apply for federal financial aid. Some schools also require the FAFSA to be filed to be considered for merit awards, regardless of income. Check with the school’s financial aid office to see what forms you need to file.
Bonus: You can use our Financial Aid Calculator to estimate your financial need.
Eligibility for Need-Based Aid
Parents have a tendency to underestimate eligibility for need-based aid and overestimate eligibility for merit-based aid.
Eligibility for need-based aid depends on more than just income. Important factors include the cost of college, family size, special circumstances that affect the family’s ability to pay for college, and whether or not the student is a dependent student.
Student income and assets are assessed more heavily than parent income and assets. Financial aid formulas are also more focused on cash flow than on income.
When seeking merit-based aid, academic performance is not enough to distinguish a student from his or her peers, especially at the most selective colleges. There are more than 80,000 valedictorians and salutatorians each year. Grade inflation and weighted GPAs contribute to more high school students having a 4.0 (or better!) GPA on a 4.0 scale.
Thousands of students get perfect scores on the SAT and ACT each year. Tens of thousands of students get at least 1500 on the SAT and a 33 or better on the ACT.
Students must make satisfactory academic progress to qualify for federal financial aid, but they shouldn’t count on good grades to pay for college.
Apply for Financial Aid Every Year
It is important to submit a financial aid application every year, even if you did not get anything other than a student loan last year. There are subtle factors that can affect eligibility requirements for need-based financial aid. These factors can change from one year to the next. Congress tinkers with the financial aid formulas periodically. If you don’t file the FAFSA every year, you might miss out on financial aid.
Financial aid is based on financial need, which is the difference between the cost of attendance (COA) and the Student Aid Index (SAI). Financial need increases when the COA increases and when the SAI decreases.
Thus, a student who enrolls at a higher-cost college might qualify for some financial aid, while the same student might qualify for no financial aid at a low-cost college, such as an in-state public college.
There are no clear FAFSA income limits. Eligibility for need-based financial aid depends on more than just income, and financial aid is not exclusively offered by the federal government. Use a tool like College Aid Pro’s MyCAP to get a personalized financial aid estimate at particular institutions.
Eligibility for Pell Grants
Students filing the simplified 2024-2025 FAFSA beginning in December 2023 will be eligible for the Maximum Pell Grant if their parent(s) are exempt from filing a federal income tax return or if their adjusted gross income is at or below 175% of that family’s poverty level (225% of the poverty level if the parent is single). For the 2024-2025 FAFSA, a family of four living in the 48 contiguous states making up to $52,500 in AGI would qualify for the Maximum Pell Grant.
Institutional Grants
Eligible students may also qualify for other forms of financial aid, such as institutional grants. For example, some students whose parents earn $100,000 or more will qualify for grants from their college. For example, almost a third (32.9%) of students whose parents earn six-figure salaries received institutional grants. A fifth (21.4%) received merit-only grants and a tenth (11.6%) received need-based grants.
Some colleges require students who are applying only for merit aid to file the FAFSA, just to make sure they get any need-based aid for which they are eligible. Colleges often use need-based aid to offset part of a merit-based grant or scholarship.
If there is any question as to whether a student might qualify for financial aid, use the college’s net price calculator to get an estimate as to how much gift aid the student might get.
How Many Students Pay the Full College Amount?
Based on 4-year college data from the Integrated Postsecondary Education Data System (IPEDS), a quarter of freshmen and a third of all undergraduate students pay the full sticker price. Slightly less than half got no institutional grants.
At Ivy League colleges, half of the freshmen and all undergraduate students pay the full sticker price, and slightly more than half get no institutional grants. Generally, the percentage of undergraduate students paying full sticker prices increases with greater selectivity. But, among the most selective colleges, fewer undergraduate students pay the full sticker price at MIT, Stanford, and Princeton.
Counter-intuitively, undergraduate students at 4-year public colleges and lower-cost colleges are more likely to pay full price than students at private colleges. Two-fifths of undergraduate students at public colleges pay the full sticker price, compared with a quarter of students at private colleges.
Overall, a third of students at 4-year colleges pay full price, compared with almost half of students at community colleges.
The lower cost at public colleges causes fewer students to qualify for financial aid, especially among high-income students.
Family income affects where the students enroll, here’s how:
- Students from high-income families enroll in colleges where three-fifths of undergraduate students pay full price
- Students from low-income families enroll in colleges where a third of undergraduate students pay full price
The same is true even when the data is limited to Bachelor’s degree programs, where the proportions are half and a quarter, respectively.
The FAFSA Is a Prerequisite for Federal Loans
Even if a student will not qualify for grants, filing the FAFSA makes them eligible for low-cost federal student loans, which are usually less expensive than private student loans. Even wealthy students will qualify for the unsubsidized Federal Direct Stafford Loan and the Federal Parent PLUS Loan.
The Federal Stafford Loan is a good way for the student to have skin in the game since they are unlikely to over-borrow with just a federal student loan.
The Bottom Line
There is no set income limit for eligibility to qualify for financial aid through. You’ll need to fill out the FAFSA every year to see what you qualify for at your college. It’s important to make sure you fill out the FAFSA as quickly as possible once it opens for the following school year.
