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How do I know if I'm eligible for federal financial aid?

The answer is you don't, until you apply. For most parents, even two-income parents, it's difficult to predict who will qualify for financial aid. Some families with incomes of $100,000 or more may qualify for financial aid, while those with lesser incomes may not.

Your current income is the main factor that determines whether your child will qualify for aid, but it's not the only factor. Other important considerations include your assets, the number of children you have in college at the same time, and how many years you have until retirement.

Regarding assets, a common misconception is that all your hard work saving for retirement will count against you come financial aid time. However, the federal government's formula for determining aid eligibility specifically excludes retirement assets from consideration. The federal formula also excludes home equity (in your primary residence only), cash value life insurance, and annuities. Be aware, however, that a college's own institutional aid application may include one or more of these assets.

The rule is "When in doubt, apply." The federal government's aid application, known as the FAFSA, is free, so all that you will lose if you discover your child is ineligible for aid is just a few hours of your time.



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