Is Extra Income for Mom Worth a Higher EFC?

Question: My son has a decent financial aid package with a large grant, work-study, and subsidized Stafford and Perkins loans. (We're debating whether to take the unsubsidized loan for $2K because of the interest rate, which is at the moment worse than a home equity line would be.) We want to keep his loans to $5K or at most $5.5K a year, but to pay the remainder, I'm taking on a part-time job. (I'm self-employed and my income fluctuates by $1-2K a year; my husband works full-time and whatever raises he gets usually are offset by increases in our health insurance premiums.) I haven't received a straight answer from the Financial Aid Office about what percentage of my additional income would be subtracted from the grant, and they won't even say that it won't be subtracted dollar for dollar. Is there any formula for figuring this out, or does it depend on the college? (The college my son chose not to attend at least told me that it would be a percentage, not a dollar for dollar reduction.)

I'm trying to figure out whether the added stress is worth it, if the college ends up just subtracting the money I earn. Thank you!

Tricky financial aid questions tend to befuddle “The Dean.” So I consulted with a finaid pro (Ann C. Playe, former associate director of admission and financial aid at Smith College) before responding. Ann said:

"The additional income would run through a formula with some protections BUT the percentage variance is more related to the level of income in the family--the higher the income, the higher the percentage that would hit the bottom line."

In other words, your son's school won't take all of your extra dough, dollar for dollar, but it's hard to predict how much they will want, and your overall household income will affect that decision. Ann also pointed out that, “The financial aid office won't make any calculations and promises now because other things may have also changed by next year. So they don't want to have the parents tell them, ‘But you said I’d only pay $1000 more.”

Ann and I both recommend that you play with your son’s college’s “Net Price Calculator.” As of this past October, all colleges were required to post a school-specific NPC online. Although the NPC’s are far from perfect, you can plug in your numbers using your current household income and then repeat the process using your anticipated higher income to see how the Expected Family Contribution changes. That should give you a ballpark sense of how your extra dough will be treated by this particular college. (Save your data, if given this option, and I also recommend that you take a screen shot of the outcome and save it, too. If, down the road, the college seems to want considerably more than what their NPC indicated, you can use this "evidence" in your appeal process. Although the NPC is not a binding contract, it may make the finaid folks feel a little sheepish if their own online tool is giving false hope.) ;-)

Ann suspects that, in your case, the extra cash flow is likely to help because you are already receiving some grant aid and therefore not in a really high income bracket. This means that there shouldn’t be a dollar for dollar reduction of the grant aid because of your new work, and thus you won't be just spinning your wheels by taking on the additional job.

So start with the NPC and see if it confirms that the stress of the added job will indeed pay off.

(posted 5/8/2012)