Summary of College Aid Calculations

Overview of DIY Money — “College Aid Calculations”

This episode focuses on how college financial aid is calculated, specifically the Student Aid Index (SAI) used in the FAFSA process, and what families can realistically do to manage college costs. The hosts explain why a working-class family with little savings may still receive little or no aid, how income and assets are weighted, and what options exist for paying for school without overextending the parents.

Student Aid Index (SAI) Explained

What the SAI is

• The Student Aid Index is the number FAFSA uses to determine whether a student qualifies for need-based aid.
• It is driven primarily by:
  • Parent income
  • Student income
  • Family assets
  • Student assets

Why some families get little or no aid

• Income is the biggest factor — roughly 80% to 85% of the formula.
• Parent income above a certain threshold is heavily weighted, and student income is also counted.
• Assets matter less than income:
  • Parent assets are assessed at about 5% to 6%
  • Student assets are assessed much more harshly, around 20%
• The hosts emphasize that if a family is earning too much, they may simply not qualify for grants, even if they have little savings.

Can You “Lower” Your SAI?

Limited legitimate strategies

• The hosts caution against any program claiming a “magic” way to get aid.
• There are some legitimate financial planning tactics:
  • Repositioning assets
  • Using vehicles like 529 plans or, in some cases, annuities
• However, if the issue is income, there is very little you can do unless you are making major retirement contributions that reduce taxable income.

Bottom line

• If income is the main driver, there usually is no easy workaround.
• Families should not assume they can game the system to qualify for more aid.

Paying for College: Practical Options

Federal loans

• Even if you do not qualify for grants, students can still access federal loans:
  • Subsidized loans: the government covers interest while the student is in school
  • Unsubsidized loans: interest accrues while the student is in school

Parent PLUS loans

• The hosts strongly caution against casually taking out Parent PLUS loans.
• These loans:
  • Are in the parent’s name
  • Usually carry higher interest rates than student unsubsidized loans
• Parents should only use them if they are confident they can handle the monthly payment.

Other ways to reduce cost

• Scholarships
• Resident assistant (RA) positions
• Community college for the first two years
• Trade school
• Military service / ROTC
• Taking a gap year or pursuing other service opportunities before college

How to Evaluate College as an Investment

Think in terms of ROI

• The hosts encourage families to ask whether a degree will provide a worthwhile return on investment.
• This matters especially for:
  • Private schools
  • Out-of-state schools
  • Expensive majors with weak job prospects

Important advice for families

• Have honest conversations with your children about:
  • Expected debt
  • Likely salary after graduation
  • Career prospects for the chosen major
• Not every degree produces a strong financial return, so borrowing should be deliberate.

Key Takeaways

• The Student Aid Index is mostly driven by income, not just savings.
• If a family earns too much, they may not qualify for much aid even with little in assets.
• There is no simple hack to dramatically lower SAI.
• Students can still access federal loans, but families should understand how subsidized and unsubsidized loans differ.
• Parent PLUS loans can be risky and should be used carefully.
• Scholarships, RA jobs, community college, and other alternatives can significantly reduce the cost of college.
• The hosts’ core advice: treat college like an investment and evaluate the return before borrowing heavily.

Final Advice from the Hosts

• Don’t assume college aid will cover the gap.
• Build a plan early, especially if you have multiple children approaching college age.
• Be intentional about debt and avoid taking on more than the expected career outcome can justify.
• Their broader wealth principle remains the same: live on less than you make, invest the rest, and do it consistently for a long time.