Is a Car an Investment on the FAFSA?

The Free Application for Federal Student Aid (FAFSA) is a form used to determine a student’s eligibility for federal financial aid. Colleges and universities use FAFSA information, including income and asset details, to calculate a Student Aid Index (SAI). The SAI is a number that helps financial aid offices understand a family’s financial strength and ability to contribute to college expenses. A lower SAI generally indicates greater financial need, potentially leading to more aid.

How FAFSA Treats Personal Vehicles

For most applicants, a personal vehicle is not considered an investment asset on the FAFSA. The FAFSA typically does not ask for the value of cars used for daily transportation, such as commuting to work, school, or running family errands. This exclusion applies to vehicles that are primarily for personal use and are seen as a necessary means of transportation rather than an investment.

The rationale behind this exclusion is that personal vehicles are generally depreciating assets, meaning they lose value over time, and are not held for generating income or appreciation. The FAFSA does not factor their value into a family’s ability to pay for college. This policy aims to avoid penalizing families for owning essential transportation.

Situations Where Vehicles May Be Counted

While personal-use vehicles are generally excluded, a vehicle’s value might be considered in less common circumstances. If a vehicle is primarily used for business, such as one owned by a family business, its value may be reported as a business asset. The business’s net worth, including the vehicle’s value, is then factored into the SAI calculation.

Vehicles held purely for investment, like classic cars or multiple recreational vehicles not used for primary transportation, could also be considered reportable assets. Their net worth, calculated as their market value minus any outstanding debt, would typically be included. Commercial vehicles that are part of a business operation also apply.

Understanding Other Reportable Assets

Beyond certain vehicle exceptions, the FAFSA requires reporting of various other assets. Common reportable assets include cash, balances in savings and checking accounts, and investments like stocks, bonds, mutual funds, certificates of deposit (CDs), and money market accounts.

Real estate holdings, specifically those other than the family’s primary residence, are also reportable assets. This can include vacation homes or rental properties. Additionally, the net worth of certain business assets and investment farms are typically reported. However, retirement accounts, such as 401(k)s and Individual Retirement Accounts (IRAs), are generally not counted as assets on the FAFSA.