Factoring in Financial Aid

Factoring in Financial Aid: How to Save for College with Financial Aid in Mind

Updated July 19, 2022

A vital part of the college planning process is applying for federal and/or institutional financial aid. While not all families qualify for federal financial aid, it is highly recommended that every family submit a FAFSA form and, if requested by the individual institution, a CSS Profile. While these forms are utilized primarily to assess your family’s ability to finance higher education, they are also integral in qualifying your student for a wide range of scholarships and grants outside of solely need-based assistance.

When planning for college with financial aid in mind, it is important to understand the difference between income and assets and how they are treated in the eyes of financial aid.

Income is assessed on a prior-prior year timeline. That means if your student is scheduled to begin college in the Fall of 2022, the income year that is considered is that of 2020.

Assets are assessed at the point of submitting the FAFSA and/or CSS Profile Forms. That means, when you submit the FAFSA form, the assets that the federal government will be assessing are any assets as of that form submission date.

Not all income and assets are assessed and not all income and assets are viewed equally. This is especially true when comparing the weight of a parent’s income and assets to the student’s income and assets. Assessment rates and what is or is not assessed vary between federal and institutional financial aid.

Federal Institutional
Parent Income
taxed and untaxed
22% - 47% 22% - 46%
Student Income
taxed and untaxed
50% after allowances Parent's Assessment Rate (46%)
Parent Assets Up to 5.64% Up to 5%
Student Assets 20% 25%

Table data applies to the 2022-2023 academic year.

According to the federal rates above, if a student has a bank account (asset) with $20,000 in it, that student would be expected to utilize 20% of that account ($4,000) for college expenses. However, if that same $20,000 bank account (asset) were in the parent’s name, the parent would be expected to utilize up to 5.64% of those funds ($1,128) for college expenses. While this is one of many factors within the federal and institutional financial aid assessments, it emphasizes the importance of holding assets in the name of the parent rather than the student when possible in order to maximize the amount of financial aid you and your student qualify for.

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