Should student income be saved as much as possible?

Question

I know you are asked how much money you have on hand as a student, whether in cash or in your checkings/savings accounts, but are you asked how much your actual income was from your job? For example, I'm making a couple thousand, more than the amount that will be exempt from calculating the EFC, but I want to use at least a thousand for my personal spending purposes. Will my family have to pay more based on the actual amount I made from my job, or will the EFC be determined solely based on how much I have remaining after I spend some of my money? If I have to pay more for college based on how much money I make regardless of how much of it I spent, I don't see the point of earning more money.

Answer 1

Your EFC is determined on a school-year basis, and is always computed based on your adjusted gross income for the prior year. Adjusted gross income is an income tax term - it is basically the sum of your income from all sources, minus certain allowed deductions. The allowed deductions are income and social security taxes paid.

There are no deductions allowed for "personal expenses".

HOWEVER - when your EFC is calculated, you, as a dependent student, receive an "income allowance" of $3080. That amount is subtracted from your adjusted gross income in calculating the important EFC component called "Student's Available Income". What that basically means is that your first $3080 in income each year is "for you", and is not counted towards money that you are expected to contribute to your college expenses.

One thing to keep in mind about your federal financial aid is that financial aid is not intended to pay for a student to attend school. Financial aid is meant as an assistance program - the primary responsibility for paying for a college education is always intended to fall on the student and his/her family. If you are earning an income, the government expects (and I believe rightfully so) that you will allocate most of those funds to your college education.

Remember this - federal financial aid is taxpayer money. When you (or any other student) qualifies for federal financial aid, the government is taking a tiny little bit of my money (and everyone else's money) and giving it to you. In that light, I think you're asking "Why won't NoOneYouKnow give me more federal assistance so that I can keep the money I earn and spend it on clothes and CDs and pizzas and movies?"

In that light, I hope you can see why the government (and its taxpayers) see your income as something that you should be using to pay for school.

You're absolutely right - if you earn too much money, the government is going to determine that you need less help. But isn't that the way it should be? Shouldn't you be paying for your education?

I hope that helped.

Answer 2

The EFC is just a code used to determine what kinds and how much financial aid you will get.  It is NOT what you will actually have to pay for your school and you don't have to pay "more" based on your income.  The best way to determine how much you'll have to pay for school is to look at the tuition rates as well as dorm and meal costs (if this applies to you).

You do have to report cash, savings and checking account amounts (as do your parents) as well as annual earnings (as do your parents).  I think you are thinking about this way too much... working part time and saving a bit of money isn't going to make you pay more for your schooling...  even those dependent students who don't work all all sometimes don't qualify for grants.