One of the biggest myths about financial aid is that you shouldn’t apply if your family makes too much money. But the reality is that there are no income limits with the Free Application for Federal Student Aid (FAFSA); any eligible student can fill out the FAFSA to see if they qualify for aid.
While some aid is based on financial need (such as subsidized loans and Pell Grants), other aid is not (such as unsubsidized federal loans). Now that you know there is no maximum income to qualify for financial aid, read on to learn what types of aid are available.
What types of federal student aid are available?
While there are no overall FAFSA income limits, the type of aid you’re eligible for and whether you qualify for need-based financial aid will depend on your family’s finances.
Even if you don’t think you qualify for need-based aid, though, it makes sense to fill out the FAFSA to see if you can get non-need-based aid. You have to complete a FAFSA each year to keep receiving federal student aid.
Below are the types of federal financial aid you can obtain as a result of filling out the FAFSA:
Federal Pell Grant
The Federal Pell Grant is money for school that typically doesn’t have to be repaid. The amount you receive depends on your financial need and the cost of attendance at your school. Pell Grant amounts change annually. For 2021-2022, the maximum federal Pell Grant award was $6,495.
Pell Grants are available only to undergraduates, and you can only receive them for 12 semesters. Learn more about your eligibility via our guide on Pell Grant requirements.
Federal Supplemental Educational Opportunity Grant (FSEOG)
Undergraduates with “exceptional financial need” can qualify for between $100 and $4,000 a year. While the government provides enough Pell Grant money for each participating school to cover all its eligible students, that might not be the case with the FSEOG.
Check for other grants for college, including those for future teachers or for the children of fallen U.S. service members, to see what you might qualify for.
Federal work-study programs
Schools participating in work-study programs provide government-funded part-time jobs for qualifying students with financial need. These programs are available for undergraduate and graduate students alike. In many cases, the work you do is related to your course of study or involves community service.
You can expect to earn at least the federal minimum wage. However, there are times that you could be paid more, depending on the skills needed for the job, as well as the funds the school has available.
Direct subsidized loan
If you’re an undergraduate with financial need, and grants aren’t covering the cost of school, a federal subsidized loan can help close the gap. The government usually pays the interest on the direct subsidized loan while you attend school — as long as you are enrolled at least half time — and during your student loan grace period, which usually runs for six months after you leave school.
Your interest rate depends on the rate Congress sets for the school year. Rates are reviewed annually, and each new school year will result in a new subsidized loan, as long as you continue to qualify.
|Rates for federal student loans||Fixed||Variable|
|PLUS (grads, parents)||6.28%||N/A|
|*Note that federal loans generally have origination fees|
Direct unsubsidized loan
This financial aid program is not based entirely on economic need. You can receive an unsubsidized loan for any amount up to the year’s maximum student loan amount or your school’s cost of attendance (whichever is less), regardless of whether you’re an undergraduate or a graduate student.
When you borrow using this program, the government won’t pay any of your interest, so it will accrue and be added to your loan amount if you don’t make interest payments while you’re at school.
Direct PLUS loan
Graduate or professional students can take out these loans, as can parents of undergraduate students. The interest is unsubsidized, so the borrower is responsible for the total cost of the debt. Interest rates on PLUS loans are higher than those charged on direct subsidized and unsubsidized loans.
The maximum amount you can borrow in PLUS loans is based on the cost of attendance at the school, minus all the other financial aid you receive. For other direct loans, plan for your borrowing limits.
Figuring out your financial need with the FAFSA
The point of the FAFSA is to help schools figure out your level of financial need. That’s right: The school determines what kind of federal financial aid package you get.
How much you need is decided by comparing your Expected Family Contribution (EFC) with the cost of attendance at your school. Here’s what you should know about it, along with some other key points:
Expected Family Contribution (EFC)
The EFC is calculated using a formula that is set by law. Financial aid offices at colleges use the information included on your FAFSA to determine how much your family can reasonably be expected to pay to cover your education expenses.
|Affects your EFC||Doesn’t affect your EFC|
|● Your family’s income (taxed and untaxed) and current assets (including 529 college savings plans if the account owner is the student or parent)
● Any benefits (such as Social Security and unemployment insurance) you or your family receive
● The size of your family
● The number of siblings you have attending college during the school year
|● Financial aid (grants, scholarships and loans) you’ve already received for college
● 529 college savings plan assets, if the account owner is a grandparent or other relative
● 529 college savings plan withdrawals, if you take out the funds before filing the FAFSA
Although there are no FAFSA income limits or maximum income to qualify for financial aid, there is an earnings cap to achieve a zero-dollar EFC. For the 2020-21 cycle, if you’re a dependent student and your family has a combined income of $27,000 or less, your expected contribution to college costs would automatically be zero. The same goes if you (as an independent student) and your spouse earn no more than $27,000 annually.
Once your EFC is determined, it’s subtracted from your school’s cost of attendance.
Cost of attendance
When you fill out your FAFSA, you specify which schools you want the information sent to. Each school has its own cost of attendance based on what you would pay to attend the school for two semesters.
In some cases, though, you might seek a certification rather than a degree. Such a program might last a different length of time. Pay attention to the period covered to understand your financial aid award better.
The cost of attendance estimate includes tuition and fees, as well as room and board. It also includes what you can reasonably expect to pay for books, supplies, loan fees, eligible study abroad programs and transportation. Finally, the estimate can also include an allowance for child care and disability costs.
Need-based and non-need-based financial aid
Once the school has your FAFSA, it can put together an aid package. You might be offered a combination of need-based and non-need-based options.
For example, your cost of attendance is $18,000 for the year and the EFC formula indicates that your family should be responsible for $14,000 of that amount. Your need-based aid maximum would be $4,000. It might be offered to you in the form of grants, subsidized loans or work-study programs.
Of course, you could run into a problem if your parents can’t afford your EFC.
That’s where the non-need-based aid comes in. You might be offered a direct unsubsidized loan, and your mom or dad might need to take out a PLUS loan as well. Your EFC doesn’t determine your non-need-based aid. Instead, it looks at your cost of attendance and subtracts all the other aid you have, including your need-based aid, any merit-based scholarships you obtained from the school or private sources and all other sources of aid.
Say for example, your cost of attendance is $18,000 and you receive $4,000 in need-based aid. If you also receive a merit-based scholarship amounting to $6,000, your non-need-based total is $8,000.
You might be offered a combination of non-need-based aid up to that amount. If you don’t receive enough financial aid to fill the gap, you could also consider borrowing a private student loan.
Each year, you should fill out the FAFSA to determine your financial aid eligibility, since it can change. If your younger sibling follows in your footsteps to college, for example, you might find yourself eligible for additional need-based aid.
Filling out the FAFSA to get financial aid
Head over to the Department of Education website to start your FAFSA application. You’ll need to have the following ready as you complete the process:
- Social Security number and, if applicable, Alien Registration number
- Financial account statements
- Federal income tax returns, W-2s and other records of money earned
Be aware that you may be able to pull in your (parents’) tax documents via the IRS Data Retrieval Tool available within the FAFSA form.
While you don’t need a Federal Student Aid ID (FSA ID) to fill out the FAFSA, it can be a good idea to create an FSA ID. Having one can make it easier to find your application once it’s started, as well as to access other information about financial aid throughout your college career. You can quickly pull up your student aid reports, as well as keep track of your direct loan servicers.
If you have your information together, it’s possible to complete your application in 30 minutes or less. Plus, you could complete the 2022-23 FAFSA form on your phone via the myStudentAid app.
You can also use the FAFSA4caster tool to estimate your potential financial aid before you even start your application, so you can get an idea of where you stand.
FAFSA applications open annually on Oct. 1 for the following school year. Apply early since some of the money is handed out on a first-come, first-served basis. The earlier you apply, the better your chances of getting the help you need for school.
In the end, the FAFSA can be a big help as you look for the funds to pay for college. It’s a good starting point to see what financial aid you qualify for. So keep FAFSA deadlines in mind as you near the next school year, and check out this FAFSA guide for more details.