Although college can be expensive, there is significant amounts of financial aid available. The National Center for Education Statistics reported that 87% of undergraduate students received some form of aid; on average, students received $15,480 per individual for the 2022-2023 academic school year.
To qualify for most forms of financial aid, you must fill out and submit the Free Application for Federal Student Aid (FAFSA) by federal, state and college deadlines. Your assets or the assets of your family can affect your eligibility for aid. Continue reading to learn about what financial assets you’re required to report, and how those assets affect your financial aid package.
What information you need to fill out the FAFSA
The FAFSA asks questions about your household size, income and assets. For the FAFSA, you’ll need to provide certain information, so you can save time by gathering the following information and documentation ahead of time:
- How many people live with you in your household
- The number of dependents in your household currently in college
- Any federal benefits you or another family member received, such as the Earned Income Tax Credit, federal housing assistance, Medicaid, Supplemental Nutrition Assistance Program (SNAP benefits, Supplemental Security Income (SSI), Temporary Assistance for Need Families (TANF) or Special Supplemental Nutrition Program for Women, Infants and Children (WIC)
- Your tax filing status
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Details from your tax return, including:
- Income earned from work
- IRA distributions
- Education credits
- Child support payments received
- Student assets, including checking or saving account balances and investments
- Spousal assets
- Parental assets
What assets are reported on the FAFSA?
The FAFSA asks about the student and family’s net worth, or the current value of your investments and businesses, minus any debt related to those assets.
The FAFSA’s definition of investments include the following assets:
- Any residential or commercial real estate besides your primary residence
- Trust funds
- UGMA or UTMA custodial accounts
- Money market funds
- Mutual funds
- Certificates of deposit (CDs)
- Stocks
- Bonds
- Money in an education savings account, including 529 plans or Coverdell savings accounts
FAFSA assets do not include life insurance policies, pension funds or retirement accounts like 401(k) or individual retirement accounts (IRAs).
When filling out the FAFSA, use the current balances of your assets as of the date you sign the form, not the balances of the previous tax year.
How the FAFSA treats assets
When it comes to the FAFSA, not all assets are treated the same.
When you submit the FAFSA, the information you submit is used to calculate your Student Aid Index (SAI), an index schools use to create your financial aid package.
The owner of the asset or type of account can affect how it impacts the SAI.
Parent assets
Under the FAFSA formula, parent assets increase the SAI by a maximum of 5.64% of their asset total.
For example, let’s say your parents had $50,000 in an investment account. That balance is assessed at the 5.64% rate, or $2,820, so the SAI would increase by that amount.
Typically, there is an asset protection allowance that shelters some parent assets. But as of the 2023-2024 academic year, the asset protection allowance dropped to $0, eliminating that benefit.
Student assets
Student assets are assessed at a much higher rate than parent assets; student assets increase the SAI by 20% of the asset value. If the student had $50,000 in an investment account, it would increase the SAI by $10,000.
Other family member assets
Previously, assets held by other family members, such as a 529 account opened by a grandparent, counted as a student asset. Because student assets are assessed at a significantly higher rate than parent assets, that issue was a significant drawback.
Under the new FAFSA changes, grandparent 529 withdrawals are no longer considered student assets, and doesn’t factor into the financial aid calculation.
Filling out the FAFSA
Even if it seems daunting, it’s critical that you fill out and submit the FAFSA as soon as possible so you can qualify for valuable grants, work-study programs and student loans. In addition to the federal government, many states and colleges use the information on your FAFSA to award financial aid. If you need help completing the form or identifying what FAFSA assets you’re required to report, check out the FAFSA application guide.
