FAFSA

• Filling out a FAFSA application is required and is the first step to receive any form of federal student aid, including Pell Grants and all the student loan programs. FAFSA uses a complex formula based on numerous factors, including assets, to determine your aid eligibility, but the number one factor in calculating estimated family contribution (EFC) is your adjusted gross income (AGI).
  
  

Adjusted Gross Income

• AGI is your taxable income -- that is, your income after all exemptions and deductions that you report on the bottom line of your tax return to the IRS. It is important to have your AGI as low as possible to keep your EFC low (so that you can get the maximum amount of financial aid). Unless you have a very basic tax return or take the time to keep up with the changes in tax law, it is a good idea to have a knowledgeable tax accountant or attorney look over your return to make sure you have claimed all possible deductions.
  
  

AGI Limits for Maximum Financial Aid

• The first thing to keep ion mind is that there is no single AGI limit that automatically qualifies you for maximum financial aid. FAFSA uses a complex formula with several variables including, size of household and net family assets. So an AGI for one family with low net assets and a large household size might qualify for the maximum financial aid, whereas that same AGI for a family with high net assets and a small household size might only qualify for 60 percent of the maximum financial aid.
  
  

Example 1

• According to the FAFSA4caster, a student with a family AGI of $31,000, with average net assets of $25,000 and a household size of four with the student being the only member of the family enrolled in college (working part-time and earning $4,000 annually) will qualify for the maximum financial aid package of a $5,500 Pell Grant, $1,465 in work-study funds and a $5,500 Direct Stafford Loan. However, if the family AGI goes up to $32,000, then the Pell Grant drops to $5,300; and if the family AGI goes up to $35,000, then the Pell Grant drops to $4,800. At a family AGI of $59,000, you are no longer eligible for Pell Grants, but you are still eligible for the full amount of work-study funds and Direct Stafford Loans.
  
  

Example 2

• The FAFSA4caster estimates a student with a family AGI of $41,000, family assets of $25,000 and a household size of six with the student being the only member of the family enrolled in college (working part-time and earning $4,000 annually), will qualify for the maximum financial aid package. However, at an AGI of $42,000, the Pell Grant is reduced to $5,400; and at an AGI of $50,000, the grant is reduced to $4,000. At an AGI of $72,000, you will no longer be eligible for the Pell Grant.