Careful: If you earn too much money this summer, it could hurt your financial aid
Summer is here, and for recent high school graduates heading to college in the fall, it’s crunch time to earn a little money. But while waiting tables or working retail, here’s a fact you should definitely keep in mind: It’s possible to mess up your financial aide by earning too much money over the summer.
Here’s how it works: On the FAFSA, students are given a standard deduction called the Income Protection Allowance. That means that if you make up to $6,400 a year (for 2015-2016 — it changes each year based on inflation), then you don’t have to worry. There are also other allowances that get factored in as well, such as income taxes.
Once all of those allowances are subtracted from your income, your financial aid will be reduced by half of what’s left over. So if you make $1000 over that cap, you’ll see you’re financial aid fall by $500. And if you have anything saved up when it’s time to file your FAFSA again, it will count as assets that can reduce your financial aid as well.
For most students, this isn’t an issue, especially if you’re working part-time for minimum wage. But if you’re making more than minimum wage or working full-time during the summer with some hours during the school year, it’s worth keeping an eye on. And if you start getting close the limits, consider contributing money to a 529 college savings plan, which can help offset any reductions when you’re filing your FAFSA. It’s also a good idea to talk to your school’s financial aid office to make sure you’re getting all aid available to you, and doing what you need to do to make sure you continue receiving it!