What Assets Count for FAFSA & Which Assets Do Not
Demystify FAFSA's asset assessment. Learn which financial holdings impact your aid eligibility and how to accurately report them for student funding.
The Free Application for Federal Student Aid (FAFSA) serves as a gateway to various federal student financial aid programs. Understanding how assets are assessed on this application is an important step for families seeking assistance with higher education costs. The information provided on the FAFSA helps determine a family’s financial capacity to contribute towards educational expenses.
Understanding FAFSA Asset Assessment
The FAFSA evaluates assets to gauge a family’s financial strength and their ability to contribute to college costs. An asset, in the context of financial aid, generally refers to money readily available or anything that can provide future financial benefits, such as property or investments. The FAFSA distinguishes between assets owned by the student and those owned by the parents, assessing them at different rates.
Student-owned assets typically have a higher assessment rate, with up to 20% of their value contributing to the Student Aid Index (SAI). In contrast, parent-owned assets are assessed at a lower rate, contributing up to 5.64% of their unprotected value. This difference means that money held directly in a student’s name can significantly impact aid eligibility more than the same amount held by a parent.
Assets Included in FAFSA Calculations
Certain categories of assets are included when determining a student’s financial aid eligibility on the FAFSA. Reporting the net worth of these assets is required, which is their value minus any debt specifically secured by that asset.
Cash, savings, and checking account balances held by both students and parents must be reported. The net worth of investments also counts, encompassing various financial instruments. This includes stocks, bonds, mutual funds, certificates of deposit (CDs), money market accounts, and commodities.
Investment real estate, such as rental properties, vacation homes, or a second home, is also counted. The equity in these properties, calculated as the market value less any outstanding mortgage or secured debt, must be reported.
Additionally, Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts are considered student assets and are included in the FAFSA calculation. Even trust funds are generally reported as assets. As of the 2024-25 FAFSA, the net worth of businesses of any size must also be reported.
Assets Excluded from FAFSA Calculations
Several types of assets are explicitly excluded from FAFSA calculations and do not affect financial aid eligibility. The value of the family’s primary residence is not counted as an asset.
Qualified retirement accounts are also excluded from asset calculations. This includes 401(k)s, 403(b)s, IRAs, Roth IRAs, SEP, SIMPLE, Keogh, profit-sharing plans, and pension plans.
Life insurance policies and annuities are generally not reported as assets on the FAFSA. Specifically, the cash value of whole life insurance policies and qualified annuities are excluded. Finally, personal belongings such as cars, furniture, clothing, and collectibles are not considered assets for FAFSA purposes.
Reporting Assets on the FAFSA Form
The FAFSA requires reporting asset values as of the specific date the application is completed. Applicants will find dedicated sections on the FAFSA form to enter the current totals for cash, savings, and checking accounts. There are also fields for reporting the net worth of investments, which includes real estate not used as a primary residence, and the net worth of businesses or investment farms. For assets with a negative net worth, such as an investment property where debt exceeds value, applicants should report the value as zero. The asset information, along with income data, contributes to the overall financial assessment.
Impact of Assets on Financial Aid Eligibility
The reported asset values directly influence the calculation of the Student Aid Index (SAI), which replaced the Expected Family Contribution (EFC) starting with the 2024-25 FAFSA. The SAI is a number derived from the FAFSA information, including income, assets, and family details, and it serves as an indicator of a family’s financial strength.
A lower SAI signifies a greater financial need, which generally leads to increased eligibility for need-based financial aid. Conversely, a higher SAI indicates a greater ability to contribute to college costs, potentially reducing the amount of need-based aid a student qualifies for.
While assets are a component of the SAI calculation, they are not the sole determinant; income typically has a larger impact on financial aid eligibility. The SAI is utilized by colleges to determine the amount of financial aid a student can receive, helping to craft individualized financial aid packages that may include grants, scholarships, loans, and work opportunities.