Does Your Student Plan on Working?

 Dear Parent, 

During the sophomore year is typically when a student turns 16…or shortly thereafter.  As your student approaches “working age”, there is some important information that you need to be aware of.  

Families that will qualify for traditional, need-based financial aid should be careful about their student's income during those years.  Student income is assessed at 50% by the financial aid formulas.  Federal financial aid will protect the first $3,000 of income, but any amount over and above that will reduce financial aid by fifty cents on the dollar. 

Income from the year before application for financial aid is what counts.  For example, a student entering college in the fall of 2010 will have to supply income information from 2009.  The following year when the student applies for financial aid again, he/she will have to supply income information from 2010.  This process is repeated every year. 

On the asset side of the equation, money in an account in your student's name will reduce financial aid by thirty-five cents on the dollar.  Asset values are counted as of the day the financial aid forms are being completed. So what do you do if your student is industrious?  You can reduce the impact of a savings account by opening a joint checking account with your social security number as the first one.  Your student will have access to the funds, but since his/her social security number is not on the account, it will not be counted as his/her asset, it will be counted as yours.  Parent assets are not nearly as damaging to financial aid as student assets. 

To minimize the impact of your student's income on financial aid, try to have him/her avoid earning more than $3,000.  If your student will need more than that for spending money, consider loaning the funds and having him/her pay you back after college. 

The experience of working part-time during high school can be very valuable to a student.  But, it is important that you are aware of the impact of their income when it comes to the financial aid process. 

Until next month…Best Wishes! 

Randy Stoltz, President