You may think that income is the only factor affecting your eligibility for financial aid. However, income alone does not determine the amount or the type of financial aid you will receive. Income is just one factor in a complex formula that calculates your Student Aid Index (SAI) – which is a number that colleges use to determine how much financial aid you are eligible for.

In addition to your and your parents’ income, there are other factors that are taken into consideration in calculating your SAI, including:

• Your dependency status (i.e., whether you are a dependent or independent student for purposes of applying for federal student aid)
• Your family size
• Your or your parents’ marital status
• Your and your parents’ assets. For a discussion of how assets are factored into the calculation of your SAI, see FAFSA Assets.

HOW THE FAFSA LOOKS AT INCOME

The FAFSA requires dependent students and one or more of their parents (depending on their marital status) to report their prior-prior year income, which is the income reflected on the federal income tax return filed two years prior to the school year for which financial aid is being sought. For example, the 2025-2026 FAFSA is based on 2023 income and tax information. Most of the tax information used to calculate your SAI will be transferred directly from the IRS into the FAFSA form if you provide your consent and approval.

WHAT INCOME IS COUNTED IN YOUR SAI?

Your SAI is calculated using the following income information from your tax return and your parents’ tax return if you are a dependent student

• Adjusted gross income.
• Tax-exempt interest income.
• Untaxed IRA/pension distributions.
• Deductible payments to self-employed SEP, SIMPLE, Keogh, and other qualified retirement plans.
• Foreign income exclusion

Together, these are referred to as "total income" on the FAFSA. 

While you and your parents may be asked to report the amount of college grants and scholarships, and federal benefits received, these amounts will be subtracted from your total income. Child support not reported as income on the FAFSA. It is reported as an asset.

SOME OF YOUR INCOME IS PROTECTED

The FAFSA formula “protects” (i.e., excludes from the SAI calculation) a portion of your and your parents’ total income. This income protection allowance is intended to cover basic living expenses and is based on household size and whether you are a dependent or independent student. The 2025-2026 FAFSA provides an income protection allowance of $11,510 for a dependent student and $43,870 for a family of four with a dependent student. The allowance for families varies based on household size.

HOW MUCH INCOME MUST GO TOWARD COLLEGE?

The amount of income included in calculating your SAI is based on your and your parents’ total income less certain income offsets and income protection (including the income protection allowance and allowances for taxes and employment expenses) and is referred to as “available income.” Available income is intended to represent how much of your and your parents’ income can be considered for college costs and can be less than zero.

You and your parents are not, however. expected to use all available income for college costs. Therefore, dependent students' available income is limited to 50 percent of their available income and parents’ available income is limited to between 22 and 47 percent depending on their income. The greater the income, the greater the amount of available income will be factored into calculating your SAI.

Using Income to Estimate Your Financial Aid Eligibility

Before you complete the FAFSA, it’s possible to get a sense of whether your income might qualify for need-based aid at public and private colleges. The College Investor, which is an online resource with a mission to help students navigate the intersection of money and education, displays a 2025-2026 SAI chart that provides an estimate of federal student aid eligibility where student income and assets are assumed to be zero.

Another resource that you can use to estimate your potential eligibility for federal student aid based on your financial information is the Federal Student Aid’s Federal Student Aid Estimator.

Also, to find out the average need-based and merit-based awards received by students for the 2023-2024 financial aid year at more than 2,000 colleges, use CollegeData’s College Search tool.

COMPLETE THE FAFSA REGARDLESS OF YOUR INCOME

Some families don’t apply for financial aid because they think their income is too high. However, it’s always a good idea to apply because in addition to being used to determine eligibility for federal financial aid, the FAFSA is also used to determine eligibility for federal student loans, private scholarships, and state-based aid. Don’t limit your chances for financial aid. Complete the FAFSA!

For guidance on completing the FAFSA, see this helpful video from the  U.S. Department of Education.