What you need to know about assets before you complete and submit the FAFSA
Completing the Free Application for Federal Student Aid (FAFSA) is a necessary step in determining financial aid eligibility. While parents often worry about how their investments will impact financial aid, it turns out that the FAFSA doesn’t count most assets. And the assets that are counted are assessed at a pretty low rate of about 5.6%.
The earlier you submit this form after October 1, the better. It takes an average of only 31 minutes to complete the application, but before you do so, be sure you understand the very important considerations below.
The FAFSA ignores qualified retirement assets, including:
- 401(k), 403(b), and pension plans
- Traditional, Roth, and SEP IRAs
In addition, it ignores:
- Qualified AND non-qualified annuities
- Cash value in life insurance
AND, it ignores:
- Equity in your primary residence
- Assets of family-owned small business (some other considerations may apply)
So what assets are counted on the FAFSA? The most common are:
- Educational accounts like 529s
- Custodial accounts like UGMA/UTMAs
- Cash, checking, and savings accounts
- CDs
- Trust accounts
Also, the FAFSA does care about equity in property other than your primary residence. And putting
property into an LLC won’t necessarily make it count as a business asset.
The FAFSA uses your prior-prior tax returns, so if you are applying for aid in 2023, you will use your 2022 tax returns. If your child is a freshman or sophomore and you are still several years away from applying, now is the time to tune in to the calendar. As much as possible, you will want to avoid extra income in your “base” year.
For a timeline and additional resources, please visit our College Resources.
Any opinions are those of Karen Coyne and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.
