What Counts As An “Asset” On The FAFSA?

You'll be asked to list any assets you or your parents have, but what counts as an asset?

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  • When filing the FAFSA, you and your parents have to report certain assets
  • Your assets are used to calculate how much need-based federal aid you are eligible for
  • The FAFSA will verify your assets before calculating your eligibility

To qualify for federal financial aid for college, you have to fill out the FAFSA (Free Application for Federal Student Aid). Filing this application gives you access to for all types of federal financial aid including grants, scholarships, work-study, and federal student loans.

When you file the FAFSA application, you will have to submit details about the money and other assets that both you as a student and your parents have. This allows schools and the federal government to determine how much you and your family can afford to pay and how much you will get by way of grants, loans or work-study.

What is considered an asset?

Assets generally include any money that you have readily available, such as money in a checking or savings account. It also includes anything that holds value and can provide financial benefits in the future, such as stocks or property.

However, it’s important to understand that the FAFSA is very specific about what is considered as an asset and what isn’t. This is not to be confused with what is or isn’t considered as an asset for other purposes.

Assets you SHOULD include on the FAFSA

According to StudentAid.gov, these are assets you need to report on the FAFSA:

  • Money in checking accounts, cash and savings accounts.
  • Real estate. While FAFSA does not consider your parent’s primary residence as an asset, you need to declare the net worth of any additional property. That includes a vacation home, a second apartment building, or a rented-out property
  • Businesses. The net worth of any businesses your parents may own.
  • Qualified educational benefits or education savings accounts such as Coverdell savings account, 529 college savings plan, and the refund value of 529 prepaid tuition plans.
  • Non-retirement investments. This includes all stocks, bonds, mutual funds, or certificates of deposit (CD’s) for which YOU are the owner.
  • UGMAs/UTMAs that you own.

To calculate the net worth of your assets, you subtract any debt owed on the asset form from the asset itself. For example, let’s say your parents own a rental property with a value of $350,000 and they owe $200,000 on the property. In this case, the net worth of the property would be $150,000.

On the FAFSA, you cannot list a negative value against an asset even if the asset has a negative worth. If an asset has a negative worth, you will have to list its value as 0.

Assets you Don’t include on the FAFSA

According to studentaid.gov, there are some assets you should not include when you file FAFSA. These include:

  • Primary residence (the home you live in).
  • UGMA/UTMA accounts that you are a custodian for, but not the owner.
  • Life insurance.
  • ABLE accounts.
  • Retirement accounts. These include any 401K plans, pension funds, annuities, non-education IRAs, etc.
  • Vehicles.

How Assets Are Used to Determine Financial Aid

FAFSA uses the details you provide about your income and assets to calculate your Student Aid Index (SAI). This was earlier known as the Expected Family Contribution (EFC), which is being phased out and transitioned to SAI with effect from the 2024-2025 award year. The SAI is an eligibility index number that a school’s financial aid office uses to calculate how much federal financial aid you will be eligible to receive if you attend that school.

The Federal Student Aid website also has an easy-to-use Federal Student Aid Estimator that you can use to calculate your SAI and estimate how much federal student aid you may be eligible to receive. Using this online FSA estimator can help you understand your eligibility for federal financial aid before completing the FAFSA.

4 Important Facts You Should Know About Student And Parent Assets

  1. The FAFSA considers students’ assets and parents’ assets differently. Assets that are in the student’s name will have a far greater impact on a family’s eligibility for financial aid than assets in the parents’ names.
  2. Generally, colleges expect parents to use up to 5.64% of their assets to pay for their child’s college education. The asset protection allowance has been removed starting from the 2023 – 2024 FAFSA. This means, all of the family’s assets will now be taken into consideration when calculating federal aid.
  3. Dependent students are expected to use up to 20% of the assets they own toward their college costs. This is regardless of whether the student’s assets are funded with their own money or with other people’s money.
  4. If you own a custodial 529 college savings plan where you are both the account owner and beneficiary, the account is considered as your parent’s asset if you are a dependent child. This could be to your benefit.

How Does FAFSA Verify Assets?

Listing the value of your assets on the FAFSA form can be time-consuming. You’ll enter the net worth of your assets and support each listing with relevant documents. But the big question is does the FAFSA verify assets? With thousands of students filing this application every year, how does the FAFSA verify assets?

It’s not possible for the federal government to verify the details of every single financial aid application. It would take up too many resources to undertake this level of verification. For the most part, the federal government expects that applicants will be honest and provide information that matches up with assets they actually own.

In addition, they have an auditing system in which about one-third of all applicants are randomly selected to verify their financial details by providing bank statements and tax forms.

What To Expect If Your FAFSA Is Selected for Verification

If you receive a notification from the FAFSA asking you to verify your financial details, don’t panic. Since about one-third of applicants are selected for verification, chances are that you could be randomly picked at least one year during your time in college.

Along with the verification notification, the FAFSA will also send you detailed instructions of how to proceed. They will also send you a list of all the documents you need to submit. In most cases, the FAFSA asks to see these documents supporting information regarding these factors:

  • Number of people in your household
  • Tax information
  • Bank statements
  • High school diploma or GED
  • Child support

You may need to submit additional documents depending on what financial information you’ve submitted. For example, if you said a parent was unemployed, you may be asked to provide a notarized letter proving their unemployed status.

Along with the documents, you will also have to complete and submit a verification worksheet. Before submitting, make sure you’ve included everything the FAFSA asked for.

On receiving all the statements and documents asked for, the FAFSA will go through them to check that that the total family income and assets matches the information submitted on your application. Failure to send requested documents or information can delay your financial aid disbursement.

Do not ignore the FAFSA verification notification if you receive it. Not completing this process may result in loss of financial aid, including federal, institutional, and state aid.

What Happens If You Provide False or Inaccurate Data on the FAFSA?

Submitting false information can have serious consequences. You will have to repay any financial aid you received immediately, and you could have fines to pay as well. In fact, major discrepancies between the actual numbers and those provided on the application could result in fines up to $20,000 and other consequences.

When it comes to listing your assets on the FAFSA, the best practice is to be honest and enter all information as accurately as possible. If listing all your assets lowers your financial aid eligibility, consider applying for scholarships or work-study as alternative ways to raise more funds to cover the tuition gap.

What if You Make a Mistake with an Asset on Your FAFSA?

Mistakes can happen when it comes to forms like the FAFSA. While the new application uses students and their families’ tax information, there could still be errors on your form.

If you spot a mistake with your list of assets, it’s important to try to correct it as soon as possible. For some errors, it’s as simple as clicking a button. However, errors with things like your savings account may require a few extra steps and corrections may even be denied unless specific requirements or circumstances are met. Corrections for the FAFSA can be submitted by mail or online.

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