Student jobs and financial aid eligibility

Families who become savvy about the college financial aid process will sometimes ask how their high school student’s summer job will affect their financial aid eligibly. The FAFSA, the form colleges use to determine how much a family can afford to pay for one year of college, measures the income and assets of both the parent and the student. A student who’s diligently worked and earned money will have that income figured into the FAFSA’s calculations. A particularly earnest student who saved any of that money has now created an asset on hand. When crunched through the financial aid formulas, that income and assets can reduce the family’s demonstrated need for financial aid. So a student who’s never had a job could technically qualify for more aid than the student who spent the last three summers bagging groceries.

But there’s good news for good workers. The FAFSA has protections in place for student earnings—a student can currently earn up to $6,570 in one year before any of it is counted as income on the FAFSA. So that summer job lifeguarding isn’t likely to sink your financial aid ship.

For high school students who work enough hours out of desire or necessity to earn more than that amount, it would be silly to reduce your hours (or to quit your job) to earn less money and ostensibly protect your financial aid. Having cash on hand is never a bad situation. But there’s something you can do to mitigate the potential negative impact on your financial aid eligibility—save some of the money in a 529 plan.

A 529 college savings plan allows families to keep money in the student’s name, but to report that money as a parent asset on the FAFSA. That’s a crucial difference as while the FAFSA assesses student assets at around 20 percent, it assesses the parent assets at 5 percent. Saving $1,000 in your own name reduces your financial aid eligibility by $200. But saving that money in a 529 plan only reduces your eligibility by around $50.

There are a lot of benefits for high school students holding regular jobs—making money, earning work experience, and even impressing colleges. So don’t back off from your work opportunities just to protect your aid. But do be aware of how much you’re earning. And remember that no matter how much or how little you earn, saving some of that money in a 529 plan is a smart way to invest in yourself and to protect your eligibility for aid.