There are a lot of good reasons for a student to get a part-time job in high school—extra money, experience on your resume, and something to impress colleges, to name a few. But there is one potential downside you should be aware of as you start your college planning. Half of your after-tax income over $3,000 a year will be deducted from your financial aid eligibility.
Let’s say an ambitious kid puts in a lot of hours working a part-time job at an ice cream shop. If she earns $5,000 after taxes (that’s not unreachable, even at minimum wage), she and her family will lose $1000 in financial aid eligibility. The colleges will also take 35% of any money she managed to save before she earned that $5,000. So the financial aid formula penalizes the student who works and earns in high school, and can be kinder to the kid who’s never made a dime.
Still, I think it’s worth it to have the job. In addition to the benefits I’ve written about before here, every dollar a student has to put towards college is a dollar your family doesn’t have to rely on financial aid to get. The formula may be kind to kids (and families, for that matter) that never bothered to save their money, but remember that not all financial aid is free money. A lot of aid comes in the form of loans, most of which are taken out in the student’s name, that need to be paid back.
A smart approach would be for students to start learning the value of saving. If you get a part-time job, put part of your weekly paycheck into your savings account. If your family doesn’t need you to help with college costs, consider yourself lucky. You can use (or keep) the savings for yourself. Otherwise, use the money to help pay for college, and be proud of the fact that you’re doing your part to help with college costs.