Many parents may not be familiar with the process for applying for, and qualifying for, financial aid for college. They may also not know which assets hurt their chances for receiving financial aid, and which do not.<\/p>\n
Understanding the process is especially relevant, because parents are now able to begin filing for financial aid for the 2018-19 school year. The application period is October 1, 2017 to June 30, 2018.<\/p>\n
There are two main documents used to apply for financial aid for college.<\/p>\n
The most widely-used form is the Free Application for Federal Student Aid<\/em> (or \u201cFAFSA\u201d), which millions of parents fill out each year to apply for federal and state financial aid, as well as institutional aid from the vast majority of public and private colleges and universities.<\/p>\n The CSS\/Financial Aid PROFILE<\/em>, which is a tool created by the College Board, is used by 229 schools, nearly all of them private, to determine who may be eligible to receive money from their institution. These schools only use the FAFSA to determine which of their students will qualify for state and federal aid.<\/p>\n THE FAFSA<\/strong><\/p>\n Assets that are non-reportable on the FAFSA<\/strong> Equity in the family home<\/span> Retirement Assets<\/span> Qualified retirement assets that don\u2019t get reported on the FAFSA include: Annuities and life insurance<\/span> Parents also do not need to report the cash value of any life insurance policies.<\/p>\n Household possessions<\/span> Family farm\/small business<\/span> Assets that are reportable on the FAFSA<\/strong> Savings and Investments<\/span> The value of these reportable assets should be based on the account balances at the time that the FAFSA is filed. It would be wise to print out account statements for verification.<\/p>\n Property<\/span> College Savings Accounts<\/span>
\nThe FASFA ignores a wide variety of assets. The primary ones that are non-reportable are:<\/p>\n
\nThe FAFSA doesn\u2019t require parents to include equity in the family home. In fact, the document doesn\u2019t even ask if the applicants own a primary home.<\/p>\n
\nApplicants do not need to include include qualified retirement assets on the FAFSA. The instructions on the FAFSA are unfortunately somewhat unclear, and they don\u2019t specifically say DO NOT include retirement assets on the form.<\/p>\n
\n– Individual Retirement Accounts (IRAs)
\n– 401(k) accounts
\n– 403(b) accounts
\n– SEP IRAs
\n– Roth IRAs
\n– Profit Sharing Plans
\n– Simple IRAs
\n– Pension plans<\/p>\n
\nApplicants should also not include\u00a0any\u00a0annuities on the FAFSA. It does not matter whether the annuities are qualified (inside a retirement account, such as an IRA or 403(b) plan) or non-qualified.<\/p>\n
\nThe value of cars, furnishings, jewelry and other household goods do not get reported the FAFSA.<\/p>\n
\nThe value of a family farm is excluded if the family resides there and materially participates in the operations. The value of a small business is ignored if it has less than 100 full-time employees and the family owns more than 50%.<\/p>\n
\nThe FAFSA does expect parents to provide information about their non-retirement assets. The most important ones to include are:<\/p>\n
\nReportable assets in this category include:
\n– Checking and savings accounts
\n– Certificates of deposits
\n– Savings bonds
\n– Taxable brokerage accounts
\n– Vested stock options
\n– Commodities<\/p>\n
\nParents must also report the equity in a vacation home and investment properties. Resources for determining the equity value include online sources such as Zillow, Redfin and Trulia, as well as recent neighborhood sale comparisons or appraisals.<\/p>\n
\nAssets in 529 college savings accounts and Coverdell Education Savings Accounts are reported as the parents\u2019 assets. However, a 529 plan owned by a grandparent, a non-custodial parent or anybody else other than the student or a dependent student\u2019s custodial parent is not reported as an asset on the FAFSA.<\/p>\n