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Student Loans

How to Get Financial Aid When Parents Make Too Much

Updated Aug 07, 2022   |   8 mins read
Written by Rebecca Lake, CEPF®  
Updated Aug 07, 2022

A common concern with federal college funding in the U.S. is the concept of being too poor to attend college, but too rich to qualify for financial aid. This is one of the most significant and harmful myths in student aid today.

Even if your family earns a substantial income, you should still apply for federal financial aid because there isn’t a hard-and-fast income cutoff for qualification.

In this guide, we’ll break down how to get financial aid for college when you think your parents make too much money, as well as how to pay for college costs if you don’t qualify for financial aid.

In this guide:

How your parents’ income affects your eligibility for federal aid

Completing the Free Application for Federal Student Aid (FAFSA) is the first step in determining what type of financial aid you might qualify for. This application gathers information about your family’s financial situation and uses it to calculate your Expected Family Contribution (EFC).

The Expected Family Contribution, which is set to be replaced with the Student Aid Index (SAI) in 2023, is a number that college financial aid offices use to determine how much financial aid you’d be eligible for if you attend their school. It’s not the amount you’ll actually have to pay for college, nor is it the amount of aid you’re eligible to receive. Instead, schools use the EFC as a guideline for calculating your aid package.

Specifically, the EFC is used to gauge eligibility for Federal Pell Grants, Subsidized Direct Loans, Federal Supplemental Educational Opportunity Grants (FSEOG), and Federal Work-Study. The methodology for calculating the EFC was laid out in the Higher Education Act of 1965, which expanded financial aid access to students.

Here’s what’s included in the EFC formula:

  • Taxable and untaxed income for parents and students
  • Federal and state income tax paid by parents and students
  • Assets belonging to parents and students, including cash and savings
  • Investments belonging to parents and students
  • Parent and student net worth
  • Education savings account balances, such as a 529

The EFC also takes into account how many people are in your household and how many people in the household are currently attending school. You generally don’t need to include your parent’s information if you qualify as an independent student.

If you’re a dependent student, your family income is a significant part of the federal aid puzzle. The FAFSA also takes into account how much your parents pay in taxes as well as any assets or investments they might have. However, the FAFSA does not consider any debts you or your parents might have, nor does it weigh credit history for financial aid approval.

What is the income cutoff for financial aid?

According to the Department of Education, there’s no income cutoff to qualify for federal student loans. However, your ability to qualify for need-based aid programs as a dependent student can directly depend on how much money your parents make. Need-based aid includes Pell Grants, FSEO grants, Direct Subsidized Loans, and the federal work-study program.

Schools use a specific formula to calculate need-based aid. The formula looks like this:

Cost of Attendance (COA) – Expected Family Contribution (EFC) = Financial Need

Generally, you can’t receive need-based aid that exceeds your actual financial need. So how do you know if your parents make too much money for financial aid?

One sign is if your EFC equals the entire cost of attendance. That means that based on the information you provided in the FAFSA, the government has determined that your family can afford to pay your entire cost of attending school without help.

At the other end of the spectrum, it’s possible to receive an automatic disqualification (represented by “0”) for EFC. That means the government expects your family to pay nothing for school, making you eligible for need-based loans and Pell Grants. For the 2022-23 academic year, the income threshold for the automatic zero EFC is $27,000.

For non-need-based aid, your EFC doesn’t factor into the calculation. The formula schools apply looks like this:

Cost of Attendance (COA) – Financial Aid Awarded So Far = Eligibility for Non-Need-Based Aid

Non-need-based aid includes Direct Unsubsidized Loans, PLUS Loans, and Teacher Education Access for College and Higher Education (TEACH) Grants.

For example, if your total cost of attendance is $15,000 and you’ve received $5,000 in need-based aid, you’d be eligible for the remaining $10,000 in non-need-based aid.

How to get financial aid without your parents’ help

There are ways to get financial aid without the influence of your parents’ income. Here are some tips on how to pay for college if you don’t qualify for financial aid or you think your parents’ income might be an obstacle.

1. Rich parents or not—fill out the FAFSA

Should I apply for FAFSA if my parents are rich? It’s a legitimate question and the answer is yes, you should complete the FAFSA even if you think your parents make too much money for financial aid. You might be surprised that you are eligible for aid you didn’t think you’d qualify for.

2. Look for scholarships and grants

Another option for obtaining financial aid for college when parents make too much is to consider scholarships and grant funding. A misconception about scholarships and grants is that these funds are only available to low earners.

That simply isn’t the case. While there are some scholarships and grants that are need based, there are others that are based on demographic details of the student, such as race or ethnicity. Other scholarships and grants provide funds to those who are following a particular degree path, or those who submit essays on a specific topic.

For example, the Palantir Women in Technology Scholarship is open to students who identify as women who are pursuing an undergraduate degree in STEM subjects.

State-sponsored programs can also provide financial aid options to qualifying students. The Cal Grant Program, for instance, offers funding to U.S. citizens and eligible noncitizens who are California residents attending a qualifying college.

You’ll need to have financial need at the California college of your choice and be enrolled or planning to enroll at least half time. Family income and assets are considered, but you might qualify if you’re an independent student.

3. Use non-need-based federal aid

As mentioned, schools use your EFC to evaluate your eligibility for need-based aid. But you could still qualify for non-need-based aid, regardless of your income. Non-need based aid includes the following types of federal student loans:

  • Direct Unsubsidized Loans: Federal loan limits are based on the year of school the student is completing and the total cost of attendance. Although payment is not due on these loans until you leave school, interest accrues while loan payments are deferred.
  • Graduate PLUS loans: Federal Direct Grad PLUS loans are available to graduate students. They work similarly to Direct Unsubsidized Loans in terms of deferment and interest accrual, but they have higher rates and no loan limits.

Federal student loans can be a viable way to cover the costs of college since they have low interest rates and favorable repayment terms. You can estimate how much non-need-based aid you’re eligible for online.

4. Consider declaring your independence

Another option for how to get financial aid if your parents make too much is to declare your independence. Being an independent student typically requires one of the following to be true:

  • You are over the age of 24
  • You are married
  • You have dependents other than a spouse
  • You are an orphan
  • You are a veteran or active duty member of the U.S. Armed Forces

There are few other ways to declare yourself independent from your parents if you don’t meet these eligibility guidelines.

If you fall into one or more of these categories, you can submit the FAFSA as an independent student and leave off your parents’ income. This means you could qualify for a larger amount of student aid.

For married students, you might be required to report your spouse’s income, which can impact how much aid you receive.

>> Read More: How Being a Emancipated Affects Financial Aid

5. Consider private student loans

Finally, if you do not qualify for federal financial aid because either you or your parents have high income or substantial assets, private student loans may be an option.

Private student loans are available from banks and lenders, and they usually require a strong credit history or a cosigner with one (though there are student loans available without a cosigner). A cosigner is someone who agrees to be jointly responsible for your student loan repayment.

Having a parent with high income act as a cosigner could actually work in your favor. Private lenders want reassurance that borrowers can repay what they owe. If your cosigning parent has a steady income and good credit history, that could make it easier for you to get approved for loans and secure lower interest rates.

It’s important to compare private student loan options because interest rates, repayment terms, and benefits vary widely. Credit and cosigner requirements can also vary from one lender to the next.

To get started, you could check out our guide to the best private student loans and see if you qualify.