How Being Retired Affects Your Child's Financial Aid
Sometime we'll receive a question from a mother or father that goes something like this, "I'm an older parent, and I'll be retired by the time my child goes to college. How will that affect his financial aid?" It's a good question, as most families rely on financial aid to make college financially feasible. But the answer is a pretty simple one.
Colleges take into account the income and assets of the parent(s) (as well as the income and assets of the student) when determining financial aid eligibility. The actual profession of the parent(s), or how that parent earns his income, isn't really relevant. So whether a parent is working and earning a paycheck, or retired and collecting a pension (or payout from a 401K) doesn't matter. The college simply calculates the parent(s)'s total income, both taxed and untaxed, and uses that figure in the standard financial aid formula to determine how much they believe the family can contribute toward college costs, which in turn helps calculate financial aid eligibility.
Now if a parent is employed, and then retires while the child is in college, and that transition to retirement results in a significant decrease in income, that change can affect a student's eligibility for financial aid. It's the same situation as one in which a parent loses a job or switches to a job with lower pay. In these situations, families should reach out to the financial aid office and ask if any additional aid can be awarded. The college may not be able to increase the financial aid immediately, but could potentially in future years.
Would you like to speak with someone one on one about your personal financial situation and how it might affect your financial aid eligibility? Or any other questions related to financial aid? You can request a one-on-one appointment with one of our College Planning Team members right on our website.