Does FAFSA Look at Assets? What Counts Toward Your Aid
Understand how FAFSA assesses your assets, which ones count for aid, and their direct impact on your federal student aid eligibility.
The Free Application for Federal Student Aid (FAFSA) is a crucial application for students seeking federal financial assistance for higher education. It determines eligibility for various forms of aid, including grants, loans, and work-study programs. A common question is how assets are considered during this process.
Understanding Asset Assessment for FAFSA
The FAFSA considers a family’s financial assets when evaluating eligibility for federal student aid. This assessment provides a comprehensive view of a family’s financial capacity to contribute towards educational costs. The Student Aid Index (SAI), which replaced the Expected Family Contribution (EFC) starting with the 2024-2025 aid year, is the metric used to gauge aid eligibility. The SAI is derived from financial information provided on the FAFSA, encompassing both income and assets. Including assets in this calculation helps determine a family’s overall financial strength and ability to contribute to college expenses.
Assets That Count Towards Aid Eligibility
Several types of assets are included in the FAFSA calculation for both dependent students and their parents. These represent readily available funds or investments that hold value.
Cash, as well as balances in checking and savings accounts.
Investments, such as stocks, bonds, mutual funds, certificates of deposit (CDs), and money market accounts. The current market value of these investments should be reported as of the day the FAFSA is submitted.
Net worth of properties other than the family’s primary residence, encompassing vacation homes, rental properties, and any other investment real estate.
Trust funds, even if access to the principal is restricted.
Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts, which are considered student assets.
Qualified educational benefits, such as 529 college savings plans and Coverdell Education Savings Accounts, included as parent assets if the student is dependent.
Business assets, specifically the net worth of businesses or for-profit agricultural operations.
Assets That Do Not Count Towards Aid Eligibility
Not all assets are counted when determining FAFSA eligibility. These include:
The value of the family’s primary residence. This exclusion applies even if the home is part of a business or farm property.
Retirement accounts, such as 401(k)s, 403(b)s, IRAs (including Roth IRAs), SEP, SIMPLE, Keogh, and pension plans.
Life insurance policies, including the cash value or equity of a whole life insurance policy.
ABLE accounts, which are tax-advantaged savings accounts for individuals with disabilities.
Personal possessions, such as vehicles, clothing, furniture, and collectibles.
Small businesses and family farms are not excluded for the 2024-2025 and 2025-2026 FAFSA cycles. This exclusion is set to be restored for the 2026-2027 award year.
Reporting Your Assets on the FAFSA Form
Accurately reporting assets on the FAFSA form involves calculating their net worth. The form asks for the net worth of various asset categories, determined by subtracting any debt directly related to the asset from its current value. For instance, if a rental property is valued at $350,000 with a $200,000 mortgage, its net worth is $150,000.
If an asset’s debt exceeds its value, resulting in a negative net worth, it should be reported as zero. Asset values must be provided as of the specific date the FAFSA application is filed, reflecting balances and market values on that day. Maintaining accuracy and honesty in reporting is paramount for a proper financial aid assessment.
How Assets Impact Your Financial Aid
Reported asset values directly influence the Student Aid Index (SAI), which determines a student’s financial aid eligibility. Assets are factored into the SAI calculation, though they are assessed at a lower rate than income. For the 2025-2026 award year, the asset protection allowance is $0, meaning no protected amount of parent assets exists before consideration.
Student assets are assessed at a higher rate (20%) compared to parent assets (maximum 5.64%). This means every $1,000 in a student’s account can increase their SAI by $200, while the same amount in a parent’s account increases the SAI by approximately $56.
A higher SAI indicates a greater ability to pay for college, leading to reduced need-based federal financial aid. Conversely, a lower SAI suggests higher financial need and a greater likelihood of qualifying for programs like the Pell Grant.