Faced with the gargantuan cost of higher education, Americans often have to choose between securing their children’s future or their own. A new rule change makes it slightly easier to do both.
Pretax contributions made to retirement accounts will no longer count as income in the formula that measures a family’s ability to pay for college, under changes to this year’s Free Application for Federal Student Aid, or Fafsa. The Education Department made the changes to simplify the form and ensure more aid goes to those who need it most.
Some families could save between $5,000 to over $10,000 on the cost of college each year, depending on their income.
Paying for college and saving for retirement are two of the biggest financial challenges Americans face. The change encourages saving for retirement while making college more affordable to middle-income Americans at a time high inflation and interest rates have stretched family budgets.