Advertiser disclosure

Is There a FAFSA Income Limit?

Many families have the misconception that there are FAFSA income limits. The truth is that a student can qualify for federal financial aid even if their family has a high income. This is because financial need is calculated based on a variety of factors, and because there is federal aid that isn’t based on financial need. Continue reading to learn more about FAFSA and income limits!

Importance of the FAFSA

The only way for a student to qualify for federal financial aid of any kind is by completing the FAFSA annually. Schools use the information from the FAFSA to determine a student’s financial aid package every year. The FAFSA gives you an idea of what type of aid you qualify for: some types are free money that you don’t need to pay back and others are loans that you do need to pay back. Completing the FAFSA allows students access to: 

  • Federal Pell grants
  • Federal work-study programs
  • Subsidized direct loans
  • Unsubsidized direct loans
  • Direct PLUS loans

Financial need only affects need-based grants, work-study, and Direct subsidized loans. Before writing it off, complete the FAFSA and you may be surprised! 

See also: How to renew your FAFSA

Need-based financial aid

Need-based financial aid is based on a student’s Expected Family Contribution (EFC). The EFC is calculated based on the information provided when you fill out the FAFSA. Your family’s untaxed income, assets, and benefits are all relevant factors in calculating your EFC. You can use net price calculators provided on each college’s website to give you a better idea of how much aid you might expect to receive. 

The following types of federal financial aid are based on financial need:

Federal Pell Grants

Funds from Federal Pell Grants do not need to be repaid. These are an example of a FAFSA program that does have income limits. The government offers Federal Pell Grants to undergraduate students who show exceptional financial need. However, there is an annual maximum amount of funds a student can receive in the form of a Pell Grant. For the 2021 – 2022 school year, the maximum was $6,495. You can receive the Federal Pell Grant for no more than 12 semesters or the equivalent of 6 years.

Federal work-study programs

Schools that participate in federal work-study programs base students’ eligibility for the program on financial need. Work-study allows students to work part-time, usually in their field of study, in exchange for federal funds. Hourly pay for work-study programs is at least minimum wage.

Direct subsidized loans

Direct subsidized loans are student loans that need to be repaid, and they are offered to students who show financial need. Subsidized loans do not accrue interest while the student is in school or during the grace period because the government pays it. 

See also: All about subsidized vs. unsubsidized loans

There is also federal aid that is non-need-based and does not consider a student’s EFC.

Non-need-based financial aid

This aid is calculated by subtracting all other forms of aid a student has received, including need-based aid scholarships, and private student loans. The remaining number is how much non-need-based aid a student is eligible for.

The following types of federal financial aid are not based on need:

Direct unsubsidized loans

Students can receive up to the school’s cost of attendance in Direct Unsubsidized Loans. The student will be responsible for paying the interest on these loans at all times.

PLUS loans

PLUS Loans are offered to graduate/professional students or to parents of dependent undergraduate students. The government offers these loans to cover gaps in financial aid. There is no financial need requirement for PLUS loans, but borrowers must not have adverse credit.

No FAFSA income limit

According to the National Center for Education Statistics, in 2009, 32% of students who didn’t submit the FAFSA chose not to because they believed they wouldn’t qualify for any aid. Again, there is no maximum income for federal student aid. Eligibility is based on more than just income. It considers EFC, which is based on factors such as the cost of the college, children in the family enrolled in college, family size, and other special circumstances.

Complete the FAFSA every year

It is important to submit a FAFSA every academic year. This is because eligibility requirements change every year, as do the circumstances of a family.  Don’t skip filling out the FAFSA!