I got a promotion. What does this mean for financial aid? | SehndeWeb

Q. My son is in high school and is planning to go to college. I just got promoted at work and I’m afraid we don’t qualify for financial aid now. I know there is some kind of backlog when you fill out the FAFSA. Will this help me when we apply?

– Mom

A. Congratulations on the promotion.

As you know, college is expensive. The extra income will help your family.

Let’s start with the different types of college aid. There are basically two:

First, grants, which are money given by the state or federal government, or university or other organizations. These are generally needs-based, meaning they’re based on a family’s ability to pay, said Jeanne Kane, certified financial planner at JFL Total Wealth Management in Boonton.

Then there are scholarships, usually awarded by a university or a third party. These funds can be need-based or merit-based, meaning they are based on the student’s accomplishments, she said.

“The beauty of grants and scholarships is that you don’t have to pay them back,” Kane said. “It’s the best kind of help.”

She said financial aid is based on income and assets. There is no specific income limit or financial aid eligibility threshold, she said. Eligibility for need-based financial aid does not depend solely on income. This is because the formulas used are complex, she says.

Many parents underestimate their ability to qualify for financial aid, she said, noting that criteria change from school to school.

“Your son may not receive aid from a public university in your home country, but he may from a private university,” she said.

To apply for financial aid, you will need to complete the Free Application for Federal Student Aid (FAFSA) each year. This will qualify your son for federal assistance based on grants and loans.

“The FAFSA uses family income information from the previous two years or the previous tax year,” Kane said. “Your promotion in 2022 will not be reflected on the first FAFSA. Indeed, for the 2023-2024 school year, you will use your 2021 tax return.”

The aid package offered to him may include federal student loans, but these will have to be repaid.

To get an idea of ​​what you might pay for a particular college or university, check out the net price calculator on their websites. The US Department of Education also provides a calculator.

Kane said these calculators provide an estimate of what your son could receive in scholarships, grants and loans from schools. It’s not guaranteed, but it will give you an idea of ​​the potential cost, she said.

Colleges themselves aren’t the only place to look for help, she said.

One place to look is Raise.me, which offers merit scholarships from participating colleges.

“Your son can track his grades, clubs, sports, volunteer activities, etc. He can then win micro-scholarships from colleges that interest him,” she said.

She said your son should start working on his college resume today so he can keep track of every activity, award, and recognition. This will make it easier for him when he applies to college in the fall, but also when he applies for scholarships, she said.

Note that in many situations, you can negotiate more money after being accepted to college, Kane said.

“For merit-based scholarships, there may be a possibility of getting a higher scholarship amount if your son’s grades have improved or he has received new accolades since he applied. “, she said.

But, she cautioned, one should not pit school against school. If you get less money from your son’s dream school, he probably won’t respond kindly to you if you say you want more because your son got more money from another college.

Also note that there are tax savings you should take advantage of if you qualify.

First, there is the American Opportunity Tax Credit (AOTC).

“It’s a tax credit of 100% of the first $2,000 and 25% of the next $2,000 of your son’s tuition and related expenses,” she said. “You can get a maximum of $2,500 per student per year.”

Your son must be in school at least half-time and is only eligible for his first four years of college.

The credit gradually disappears at higher income levels.

For married people filing jointly, the credit fades out between $160,000 and $180,000. At $180,000, you’re no longer eligible, Kane said. The phase-out for singles is $80,000 to $90,000.

Then there is the lifelong learning tax credit.

“You can claim 20% up to $10,000 in tuition and fees,” she said, noting that the income wind-downs are the same as the US Opportunity Tax Credit.

But you can’t overtake. You can choose either the Lifetime Learning Tax Credit OR the US Opportunity Tax Credit, but not both.

“If you haven’t already, you need to have a discussion with your son about what you’re willing to pay for college,” Kane said. “It’s a big financial decision, and he needs to know now what you’re willing to pay as he begins the college search process.”

Discuss if you are willing to pay for any college, at any price, or if you are willing to pay a certain dollar amount that is equal to tuition at a public university.

“It’s important that you all know where you are before he starts looking,” Kane said.

Send your questions to Ask@NJMoneyHelp.com.

Karin Price Mueller writes the Bamboos column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. To find NJMoneyHelp on Facebook. Register for NJMoneyHelp.comit is weekly e-newsletter.

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