Key Takeaways:
- The FAFSA, CSS Profile, schools, and organizations may consider your assets when determining financial aid eligibility.
- Students and parents don’t have to report all types of assets, but the CSS Profile requires more information than the FAFSA.
- Students are expected to use more of their assets (up to 20-25%) to pay for college than their parents (up to 5-5.64%)
Flickr user Joan Nova
To determine financial aid eligibility, the federal government, schools, and organizations look beyond income – they consider students and parents’ assets, too. Assets are any resource that has economic value and will provide future benefits. Not all types of assets affect financial aid, but some can impact your eligibility and offer letters more than others. Below, we’ve outlined some must-know information about assets so you can better plan for your financial future and education.
Assets and the FAFSA: What Do You Have to Report?
An asset refers to tangible and intangible resources that can create positive economic value, such as savings in a bank account, a home, or even intellectual property.
You don’t have to report all of your family’s assets on the Free Application for Federal Student Aid (FAFSA), but the Federal Student Aid (FSA) uses income and some types of assets to determine your Student Aid Index (SAI). Colleges, universities, and organizations then use the SAI to decide financial aid eligibility and offer letters.
With the updates over the last few years, the FAFSA gets most of the information about your financial situation from your previous year’s taxes. Generally, the FSA is interested in:
- Current amount of money in cash as well as savings and checking accounts
- Net worth of businesses and investment farms
- Any investments in real estate (excluding the family’s primary residence)
- Other investments, including trust funds, stocks, bonds, and more
- Any education savings accounts or benefits, such as 529 plans, Coverdell savings accounts, and Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA) accounts
- Child support
The FAFSA doesn’t require you to report your primary residence, Achieving a Better Life Experience (ABLE) accounts, retirement plans, annuities, pension plans, or the value of any life insurance policies. You also won’t have to report any 529 plans not owned by the parents or student in question or UGMA/UTMA accounts where the student is the custodian rather than the owner.
The college may ask for additional information or documents regarding your assets. Submit these as soon as possible – delaying could mean you miss out on free cash.
Who Doesn’t Have to Report Assets on the FAFSA?
The FAFSA won’t take assets into account in two scenarios:
- The student’s parents or the student and their spouse have a combined income at or below $60,000.
- If anyone in the household qualifies for federal benefits, such as Medicaid, housing assistance, Supplemental Security Income (SSI), and Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), among others.
Assets and the CSS Profile
Some colleges and universities require you to complete the CSS profile to apply for financial aid through the school. The CSS Profile takes more assets into account than the FAFSA, including:
- Primary residence value
- Small business net values
- Any 529 plans where the student is the beneficiary
- Sibling assets
How Do Student and Parent Assets Affect Financial Aid?
In most cases, your or your parents’ assets will affect your financial aid.
With the FAFSA, parents are expected to use up to 5.64% of their qualifying assets to help cover the cost of their student’s college education. However, the student’s assets are weighed more heavily – the federal government and schools expect students to use up to 20% of their qualifying assets to pay for college.
Students who complete the CSS profile might be required to use up to 25% of their assets, while parents assesses around 5%.
How To Navigate Assets and Financial Aid To Save Money
If you’re unsure how your assets will affect your financial aid, you’d like to protect your money, or you’re worried about how gifts to the students will affect their eligibility, it’s best to reach out to a financial advisor or accountant. They can walk you through your options and provide advice on the best steps for moving forward.
After you submit your FAFSA and information on your assets, you’ll receive your SAI and financial aid offer letters. Review these offers carefully to determine the best options for your education goals and financial health, now and into the future. However, comparing financial aid letters can be confusing as schools don’t follow a single format or provide the information in an easy-to-understand manner.
To find the best deal, try using our Financial Aid Offer Letter Comparison Tool. The tool breaks down how much the school is offering, how much you need to pay out of pocket, and an estimation of how much debt you’ll have after graduation.
