Navigating Changes to ACA Subsidies and FAFSA Eligibility

Your girlfriend’s recent salary increase has brought both excitement and some financial concerns as she navigates the Affordable Care Act (ACA) and FAFSA grant eligibility. Here’s a comprehensive guide to help her understand the potential impacts:

Understanding the ACA Subsidy

The ACA, also known as Obamacare, provides financial assistance to lower-income individuals and families to purchase health insurance through the Health Insurance Marketplace. Your girlfriend’s current $300 monthly subsidy is based on her previous income of approximately $26,000 per year.

With her new salary of $50,000, her Modified Adjusted Gross Income (MAGI) for 2018 will likely exceed the 400% of the Federal Poverty Level ($48,240). This means she may no longer qualify for the same level of subsidy.

To determine her future eligibility, she can follow these steps:

1. Calculate her estimated MAGI for 2018: This can be done by multiplying her current hourly wage by the number of hours she expects to work for the remainder of the year.
2. Refer to the ACA Premium Tax Credit Table 2: This table outlines the reduced-cost percentage based on income and family size. Knowing her estimated MAGI, she can estimate the monthly premium she would qualify for.
3. Subtract the estimated premium from her monthly plan cost: The remaining amount would be the monthly subsidy she may be eligible for.

FAFSA Grant Eligibility

FAFSA (Free Application for Federal Student Aid) is used to determine eligibility for federal student financial aid, including grants, scholarships, and loans. Your girlfriend’s current Pell Grant eligibility is based on her family’s 2016 income.

Since FAFSA uses previous year income information, her recent salary increase will not affect her current awards. However, it may impact her eligibility for future grants.

The 2020-2021 FAFSA cycle will use her family’s 2018 income. Since her income will have increased significantly by then, she may no longer qualify for Pell Grants or other needs-based financial aid.

Financial Planning Considerations

While your girlfriend’s salary increase is a positive step, it’s important to plan for the potential changes to her ACA subsidy and FAFSA eligibility. Here are some factors to consider:

Budgeting for increased health insurance costs: She should start saving a portion of her additional income to cover the potential increase in her monthly health insurance premiums.
Exploring other health insurance options: If she no longer qualifies for ACA subsidies, she may want to consider other health insurance options, such as group plans through an employer or private plans.
Seeking professional guidance: A licensed health insurance agent or financial advisor can provide personalized guidance and help her navigate these changes.

Remember, it’s essential to stay informed and proactive to ensure your girlfriend has access to affordable healthcare and educational funding. By understanding the potential impacts of her salary increase, she can make informed decisions and plan accordingly.