The Free Application for Federal Student Aid, commonly known as FAFSA, is an application offered by the federal government that students can fill out to determine their eligibility for grants, loans and other financial assistance for attending college. This money is provided by the federal government and is made available to individuals according to a formula that factors in an individual's financial resources. The receipt of unemployment benefits can affect a person's eligibility.
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The FAFSA application requires the individual to answer a number of different questions, many of which relate to the individual's financial resources. Generally, the larger an individual's income, the smaller the amount of grants and loans he is deemed eligible to receive. An individual must fill out the whole application truthfully. If the person lies on his application and the lie is discovered, he may be required to pay back any money granted to him.
Adjusted Gross Income
An applicant's adjusted gross income, as determined by the Internal Revenue Service, includes not just income earned from a job, but also income from other sources, such as unemployment benefits. However, nowhere does the FAFSA application ask the applicant specifically about whether a person receives unemployment benefits and, if so, how much.
The FAFSA does ask if the individual applying is a dislocated worker. While not all people who receive unemployment benefits count as dislocated workers, many of them do. If a person has been laid off from his job through no fault of his own, such as because of structural changes in the company, he counts as a displaced worker. Under FAFSA rules, this status qualifies for him for the receipt of additional grants and loans.
Some recipients of FAFSA grants or loans wonder whether the receipt of this money will affect their eligibility for unemployment benefits. It does not, as unemployment agencies do not count school grants as income, given that they can only be used to pay for school. However, one of the requirements of receiving unemployment is that the person is available to work. If a person is attending school full-time, the agency may deem him unavailable for work and deny him benefits.