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FAFSA Assets

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When you complete the Free Application for Federal Student Aid (FAFSA), you’ll be asked to report information about your and your family’s assets. Read on to learn how assets can affect your eligibility for federal student aid. 

The assets that you and your family own can affect your Student Aid Index (SAI), the number that colleges use to determine how much financial aid you are eligible for. An asset is essentially any money that you have readily available (such as money in a savings or checking account) or something that can provide financial benefits in the future, such as property or stocks. The FAFSA asks dependent students and their parents to report the net worth of their assets (which is the value of an asset less any debt owed on the asset).

What's Counted As an Asset ON THE FAFSA?

Not all assets must be reported to determine your SAI. For purposes of the FAFSA, assets include:

  • Current total of cash, savings, and checking accounts
  • Current net worth of businesses and investment farms but not including the value of crops that are grown solely for consumption by the student and his or her family
  • Current net worth of investments, including real estate that is not the family's primary residence; rental property; trust funds; money market funds, mutual funds, certificates of deposit, stocks, stock options, bonds, other securities, installment and land sale contracts (including mortgages held), and commodities
  • Qualified educational benefits or education savings accounts such as Coverdell savings accounts, 529 college savings plans, and the refund value of 529 prepaid tuition plans; and Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts
  • Child support payments

The following assets are not included in the FAFSA formula:

  • Primary residence
  • The value of life insurance
  • ABLE accounts
  • Retirement plans (e.g., 401(k) plans, pension funds, annuities, non-education IRAs, and Keogh plans)
  • 529 Plans owned by grandparents or for children/siblings other than the student applying for financial aid.
  • UGMA/UTMA accounts for which the student is the custodian but not the owner or the value of qualified education benefits or education savings accounts that are for the benefit of the parent’s other children (not the student)
Many private and some public colleges and universities use information from an additional aid application (the CSS Profile) to determine eligibility for aid from their own resources. The CSS Profile considers additional assets that the FAFSA does not, such as primary home equity value, net value of small businesses, sibling assets, and 529 plans that list the student as a beneficiary regardless of who the account owner is.

 

Some Assets Are Not Counted but Still Affect Financial Aid

  • Retirement accounts. The FAFSA does not ask about the value of retirement accounts, such as traditional and Roth IRAs, 401(k) plans, and pensions. But the untaxed contributions to and withdrawals from these accounts must be reported on the FAFSA as income.
  • Assets held by others. You don't have to report assets intended for college that are owned by a third party (e.g., your grandparents). However, once the value of the asset is given to you or spent on your behalf, you must report it as untaxed student income on next year's aid applications. Student income is weighted more heavily than parent income in the federal financial aid formula (more on this below), so any monetary gifts you receive could impact the amount of aid you will be eligible for.
  • Some students or families don’t have to report assets. If a dependent student’s parents, or an independent student and their spouse, have a combined income of $60,000 or less, their assets will not be considered in the FAFSA formula. Also, if anyone in the student’s household qualifies for means tested federal benefits including SSI, SNAP, TANF, WIC, Medicaid, or Federal Housing Assistance, assets do not need to be reported.

Student and Parent Assets Are Counted Differently

A dependent student’s assets have a greater impact on eligibility for federal financial aid than their parents’ assets. Colleges generally expect families to use up to 20 percent of the assets owned by a dependent student to pay for college and only up to 5.64 percent of the assets owned by parents. A 529 account that a parent sets up for a dependent student is considered the parent’s asset for purposes of the FAFSA even though the account benefits the student, and therefore will be counted at the lower rate to determine financial aid eligibility.

Transferring Assets Held in the Child's Name

Because assets that are owned by a dependent student have a greater impact on financial aid eligibility than assets owned by parents, some families transfer assets owned by their dependent student into their name. It is wise, however, to consult with a financial advisor, attorney, or accountant before undertaking such action because it could have financial, tax, financial aid and/or other implications.

Assets are just one factor in determining your financial aid eligibility, so it’s important to complete the FAFSA regardless of your and your family’s assets. The FAFSA determines eligibility for federal need-based aid, but it is also used to determine eligibility for scholarships from colleges and private sources, and financial aid from your state.

For guidance on completing the FAFSA, or to start applying for financial aid, visit the Federal Student Aid website.

 

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