Financial Aid: Contributions from Parental Income and Parental Assets

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Financial Aid: Contributions from Parental Income and Parental Assets

Contributions from Parental Income

Parental income includes taxable and non-taxable income from the year preceding the award year (last year’s income if you plan to get financial aid this calendar year). The methodology automatically deducts an income protection allowance—money for food, rent, transportation, laundry, etc. The income protection allowance is adjusted for the number of family members, and is based on a national average skewed just above the poverty level. Federal and state income taxes, Social Security taxes, and an employment expense allowance (up to $4,890 if both parents work or if it is a single parent household) are subtracted from parental income to compute "available income." Available income is multiplied by a factor ranging from 22–47% (graduated upward on the amount of "available income") to determine the amount from income.

Contributions from Parental Assets

Parental assets include the value of stocks, bonds, savings accounts, and business assets as of the date the parents sign the form. To determine the amount from parental assets, an asset protection allowance—a sort of nest egg for the golden years based on the age of the older parent—is subtracted from the amount of parental assets, and the remainder is multiplied by approximately 12%.

Contributions from Student Income

Students add up all their income and subtract their federal, state, and Social Security taxes. They may also subtract an income protection allowance ($11,510 for 2025–26). The amount from student income is 50% of everything the student earns that is over that amount.

Contributions from Student Assets

Students add up all their assets, including savings, investments, trust funds, and certain retirement accounts. The amount from student assets is multiplied by 20%.

The updated student aid index formula, which replaces the old expected family contribution (EFC), will not provide families with multiple in-college children a significant financial aid advantage.

In single-parent families where parents are divorced or separated, students use the income and assets of the parent with whom they lived for the greater part of the calendar year preceding the year in which they enter post-secondary school. Where the parent has remarried, the step-parent’s income and assets must also be included in the calculation, just as though he or she were a natural parent.