Updated: Oct 20, 2023
Article highlights
- Make sure to report all income for both parents, as well as the student applying, on the FAFSA.
- Income information helps schools calculate what your family can reasonably contribute toward your student’s college education.
- Some simple tips, like filing the FAFSA early, can increase the amount of aid your family receives.
The FAFSA (Free Application for Federal Student Aid) asks for a lot of financial information from parents (i.e., parent, guardian, adult at home), including details about your income. This may have you wondering if there are ways to reduce your income to help increase your child’s financial aid eligibility. Before making any decisions, learn more about how income is reported on the FAFSA and if actions you take to increase student aid this year could lower it next year.
FAFSA FAQs
Your child’s dependency status determines whose income information is needed for the FAFSA. Dependent students report both their financial information and their parents’ when completing the FAFSA. Independent students report their own financial information, including a spouse and any dependents.
Beginning with the 2024-25 award year, the FAFSA Simplification Act will include an overhaul of how federal student aid is calculated and distributed. Even if you have completed the FAFSA in the past, take note of these updates since they will impact how you report your income on the form. Below is a list of what you’ll need to include:
- Student and parent income.
- Available cash, including balances in savings and checking accounts, and any investment portfolios.
- Assets, such as child support received, all real estate holdings other than the house you live in, and any business or farm assets.
- Untaxed income, such as tax-exempt interest income and untaxed portions of pensions and individual retirement account distributions.
Most income items can be found on your tax return and will be retrieved and transferred directly into your FAFSA via a direct data exchange with the IRS. This eliminates the need for you to manually enter most of your income.
There are no income requirements or cap to the amount of money you can earn to qualify for federal student aid.
Schools use income information to calculate what your family can reasonably contribute toward your student’s college education. This number is known as the Student Aid Index (SAI) (previously EFC) and schools use it to determine your child’s eligibility for financial aid. The calculation is based on a formula established by law. The formula considers many factors including, but not limited to, household size and a family’s income and assets.
Available cash counts toward your ability to pay for college and will be factored into the SAI, which can reduce the amount of federal student aid you receive.
Tips for filling out the FAFSA
1. Submit the FAFSA ASAP
There are lots of deadlines for filing the FAFSA: the federal deadline, the deadline for any aid offered by the state you live in, and deadlines for the schools your child is applying to. Filing as soon as you can after it opens on October 1 can ensures you won’t miss any deadlines for financial aid. But that’s not the only reason to apply early. Some aid, including scholarships and grants, are given out on a first-come, first-served basis, which means that even if your student qualifies, they won’t be eligible once all the money has been allocated.
2. Look out for typos
Typos and incorrect information can disqualify your student from the FAFSA. Before filing, double-check everything on the form, including making sure you’ve included all income and that you’ve correctly reported your child’s dependency status.
3. List all the colleges your child plans to apply to
Since colleges use the FAFSA to determine what aid they’ll give out, it’s vital that you include any schools your child is considering applying to, up to 20. If you need to add more schools, you can do this after you’ve submitted the FAFSA. The order of schools doesn't matter for federal aid, but it could make a difference on a state level. Some states require that you list an eligible state college in a certain position to receive aid from the state.
About the Author
Jodi Okun is founder and president of College Financial Aid Advisors. She has been featured in The Wall Street Journal, Mashable, US News & Education, and The Huffington Post. The opinions expressed in this article are Jodi’s and do not necessarily reflect the opinions of Discover® Student Loans.
Discover Student Loans encourages you to consult a financial planner before making financial transactions. You should also consult a tax professional for tax advice.
FAFSA® is a registered trademark of the US Department of Education and is not affiliated with Discover Student Loans.
