Because the government feels that it’s primarily the family’s responsibility to pay for the college education, the FAFSA requires various pieces of financial information from both the parents and the student. Among the pieces of information requested about both are:
- Adjusted gross income
- Income tax paid
- Yearly earnings
- Money in Cash, Savings, Checking
- Value of investments
- Pension, IRA, etc. payments and deductions
- Child support paid or received
Although all of this data and more is requested, the formula that the FAFSA uses to calculate your EFC weighs earnings most heavily. Why? While the federal government wants you to sacrifice and pay your fair share to send your child to college, it doesn’t want you to go broke! By weighing your recent income more heavily than your savings, investments or pension dollars, the government feels it is leaving you with a cushion for your future.
While some people may be tempted to manipulate their income so that the two years of information that they put into the FAFSA shows a much lower earning level than their true average earnings, be mindful that this kind of tactic often serves to little advantage. This move may provide a family with a lower EFC (Expected Family Contribution) for federal funds (money from the government), but it will generally not have much effect when applying for institutional funds (money allocated by the school) . That is because institutional awards are often based on CSS PROFILE information, which is far more detailed and uses a different methodology.
Also, remember that federal grant aid is reserved for the most needy. That means that even though the earnings that you note on the FAFSA may be low, if your other financial data does not show you to be particularly needy, your EFC may still turn out to be quite high (and thus your financial need low) making the machinations required to change your income level not worth the effort.
In the EFC calculation, student assets and earnings overall are weighted more heavily than those of the parents. This fits with the idea that it is the student who is most directly benefiting from the college education, so it is the student who should provide the greatest relative contribution to fund it.
For more information about what information you’ll need to complete the FAFSA, visit www.fafsa.ed.gov to download a PDF of the FAFSA or get a list from the website’s Help section.