How is federal financial aid eligibility determined?
When a student or family applies for financial aid, determining eligibility is a multi-factor process. More than just income is at play. Other factors that affect eligibility include:
- The size of the family
- Full-time or part-time student status
- Dependency status
- Citizenship status
- Academic progress
Determining financial need
Two main factors ultimately determine a student’s eligibility and how much financial aid they receive. These are:
- Cost of attendance (COA)
- Student Aid Index (SAI), which was formerly the Expected Family Contribution (EFC)
COA is basically what it sounds like: the expenses a student takes on by attending school. This isn’t the same thing as tuition, however. COA comprises tuition and fees, books and supplies, living expenses (including housing and food), dependent-care related expenses, transportation and more.
COAs are generally set averages provided by schools that may vary based upon the student’s credential level, program, enrollment status or living arrangements.
SAI is an eligibility index number that a school’s financial aid office uses to determine how much federal student aid a student would receive. This number results from the information provided on the FAFSA. This number is not a dollar amount of aid eligibility or what a family is expected to provide. A negative SAI indicates the student has a higher financial need.
Financial need is calculated as follows:
Financial need = COA – SAI
When a student has calculated their financial need, they can explore different programs to see what kind of funding (if any) their financial need makes them eligible for. Keep in mind, there are various eligibility criteria that must be met in addition to a student’s financial need.
Here’s where it gets tricky: Looking at this equation, it would be easy for a student to conclude that reducing their income can increase their financial need, and therefore qualify them for larger sums of federal aid. But this line of thinking is actually incorrect — and the reason boils down to how exactly the SAI is calculated.
Do all financial aid programs take income into account?
Federal financial aid programs that use income to determine eligibility are collectively called need-based aid. These include:
Each of these programs has specific eligibility requirements and limits on how much a student can receive.
There are other nuances too. Loans have to be repaid while grants do not (except under certain circumstances). And not all financial aid programs necessarily take a student’s or family’s income into account when eligibility is being determined. There is an entire category of federal financial aid programs that do not take income into account at all. This category is considered non-need-based federal student aid, and it includes:
The amount a student is eligible for through these programs is determined by subtracting the financial aid awarded to the student from their cost of attendance.
I have a job. Am I still eligible for financial aid?
It’s hard to give a one-size-fits-all answer to this question. To determine eligibility, students should complete the FAFSA form.
Christine Conway, the director of Financial Education Initiatives at University of Phoenix, underscores the importance of keeping an open mind about options.
“Look into all options to pay before borrowing,” she advises. “Find out if your employer offers education assistance. If so, find out how the program works.”