Does Quitting Work Earn You Higher ACA and FAFSA Subsidies?

Many families with college students grapple with the dilemma of whether to quit their jobs to obtain maximum subsidies through the Affordable Care Act (ACA) and the Free Application for Federal Student Aid (FAFSA). This blog explores this complex issue, providing valuable insights to help you make informed decisions.

Understanding ACA Subsidies

The ACA provides financial assistance, known as premium tax credits, to eligible individuals and families to help them afford health insurance coverage. The amount of subsidy you qualify for depends on your income, family size, and the cost of health insurance plans in your area.

FAFSA and Income

FAFSA, on the other hand, is a form that determines a student’s eligibility for federal financial aid. The FAFSA uses a formula that considers the family’s income and assets to calculate the Expected Family Contribution (EFC). A lower EFC makes a student eligible for more federal grants, loans, and work-study programs.

Quitting Work for ACA and FAFSA Goals

While quitting work may temporarily reduce your income, it’s crucial to weigh the potential benefits and risks.

Advantages:

Increased ACA subsidies: Lower income can lead to higher ACA premium tax credits.
Improved FAFSA eligibility: Reduced income may lower your EFC, making your child eligible for more financial aid.

Disadvantages:

Loss of income: Quitting work means losing your salary and any employer benefits.
Delayed FAFSA benefits: FAFSA uses prior-prior year income data. If you quit work now, it won’t affect your child’s FAFSA eligibility until two years later.
Long-term financial impact: Quitting work prematurely can have negative consequences for your retirement savings and overall financial well-being.

Making an Informed Decision

Whether or not to quit work for ACA and FAFSA subsidies is a personal decision that requires careful consideration. Here are some factors to keep in mind:

Your age and retirement goals
Your child’s college expenses and financial aid status
The availability of other financial resources

It’s always advisable to consult with a financial advisor and a college financial aid counselor to discuss your specific situation and explore all available options. They can help you make an informed decision that balances your immediate financial needs with your long-term financial goals.

Remember, quitting work should not be the primary driver for obtaining ACA or FAFSA subsidies. It’s a complex decision that needs to be made after weighing all the potential consequences and benefits.