Asset	Protection	Allowance=	in	the	2025-26	Student	Aid	Index	(SAI)	and	Pell	Grant	Eligibility	Guide)	from	the	parents9	net
worth.	Discretionary	net	worth	may	be	less	than	zero.
Finally,	the	discretionary	net	worth	is	multiplied	by	the	conversion	rate	of	12%	to	get	the	parents9	contribution	from
assets,	which	represents	the	portion	of	parental	assets	considered	available	to	help	pay	for	the	student9s	college
education.	If	the	contribution	from	assets	is	negative,	it	is	set	to	zero.
Calculation	of	parents9	contribution.	This	is	the	final	step	in	determining	the	parents9	contribution.	The	parents9
available	income	and	contribution	from	assets	are	added	together	to	determine	the	parents9	adjusted	available	income,
which	can	be	a	negative	number.	The	total	parents9	contribution	from	adjusted	available	income	is	calculated	from	the
amounts	and	rates	in	<Table	A5:	Parents9	Contribution	from	Adjusted	Available	Income=	in	the	2025-26	Student	Aid	Index
(SAI)	and	Pell	Grant	Eligibility	Guide.	The	rates	in	Table	A5	increase	from	22%	to	47%	as	the	adjusted	available	income
increases.	This	is	based	on	the	principle	that	as	income	increases	beyond	the	amount	needed	to	maintain	a	basic
standard	of	living,	the	portion	used	for	family	maintenance	decreases	and	the	portion	available	for	discretionary	purposes
increases.	Therefore,	a	progressively	larger	amount	of	income	may	be	contributed	toward	postsecondary	educational
costs.	The	parents9	contribution	from	adjusted	available	income	may	be	negative.
Student9s	Contribution	From	Income
Student9s	available	income.	The	student9s	available	income	is	calculated	by	subtracting	certain	allowances	from	the
student9s	total	income.	These	allowances	account	for	certain	nondiscretionary	expenses,	such	as	taxes	and	basic	living
expenses.	Once	a	minimum	level	of	support	has	been	offset	for	those	expenses,	the	formula	assumes	that	the	remaining
income	is	available	for	discretionary	purposes,	including	paying	for	a	postsecondary	education.
The	student9s	available	income	is	the	sum	of	the	taxable	and	untaxed	income,	minus	amounts	reported	in	the	income	but
excluded	from	the	formula	(offsets	and	allowances).
Student9s	taxed/untaxed	income.	The	sum	of	the	following	items,	reported	on	a	U.S.	tax	return,	is	the	student9s	total
income:
Student9s	AGI
Student9s	deductible	payments	to	self-employed	SEP,	SIMPLE,	Keogh,	and	other	qualified	retirement	accounts
Student9s	tax-exempt	interest
Student9s	untaxed	IRA/pension	distributions	(excluding	rollovers)
Student9s	foreign	income	exclusion
Student9s	income	offsets.	The	sum	of	the	following	items	decreases	the	student9s	total	income:
Student9s	taxable	college	grant	and	scholarship	aid	(included	as	income).	This	amount	is	self-reported	on
the	FAFSA	form.
Student9s	education	credits.	Use	the	amount	reported	on	the	FAFSA	form.
Student9s	Federal	Work-Study	(FWS).	Schools	annually	report	FWS	earnings	by	individual	earners	to	the
Department.	ED	will	then	use	this	information	to	report	FWS	on	the	individual	earner9s	FAFSA	form.
Student9s	income	allowances.	The	sum	of	the	following	allowances	reduces	the	student9s	total	income:
U.S.	income	tax	paid.	Use	the	amount	reported	on	the	FAFSA	form.
Student9s	payroll	tax	allowance.	Use	<Table	A1:	Payroll	Tax	Allowance=	in	the	2025-26	Student	Aid	Index	(SAI)
and	Pell	Grant	Eligibility	Guide.	Apply	the	rates	shown	in	each	step	of	the	table	to	the	total	income	earned	from	work
in	2023	for	the	student	(as	reported	on	the	FAFSA	form).	The	total	allowance	for	payroll	taxes	is	never	less	than	zero.
Income	protection	allowance.	This	amount	is	set	annually.	See	the	2025-26	Student	Aid	Index	(SAI)	and	Pell	Grant
Eligibility	Guide	for	the	current	year	allowance	amount.
Allowance	for	parents9	negative	adjusted	available	income.	If	the	parents9	adjusted	available	income	is
negative,	enter	the	amount	as	a	positive	amount	in	the	calculation.	If	the	value	is	positive,	set	this	allowance	to	0.
Finally,	the	student9s	available	income	is	multiplied	by	the	assessment	rate	of	50%	to	determine	the	student9s
contribution	from	income,	which	may	be	a	negative	number	(as	low	as	-1,500).