FAFSA asset reporting requirements: Do savings and investments count with low taxable income?

Yes, FAFSA looks at both income AND assets. Here's a quick breakdown:\n\n- Reportable parent assets include: checking/savings accounts, non-retirement investments, 529 plans owned by the parents, real estate other than your primary residence\n\n- Protected assets (not reported): primary residence, retirement accounts (401k, IRA, etc.), small businesses with fewer than 100 employees, life insurance policies\n\nHowever, there's an Asset Protection Allowance based on the age of the oldest parent that shields some assets from consideration. For most families, only about 5.64% of reportable parental assets above the allowance are counted in the SAI calculation.\n\nSo while your parents' retirement accounts won't count, their other savings and investments will be factored in, but at a relatively small percentage.

Thank you so much! That 5.64% number is way lower than I expected - I was afraid they would count 100% of their savings against us. Do you know if there's a specific threshold where assets start to really hurt financial aid chances? My parents have about $83K in non-retirement savings.

The FAFSA system is TOTALLY designed to penalize responsible families who actually SAVE money! My daughter got ZERO aid because we had savings for emergencies, while her friend whose parents spent every dime they made qualified for full Pell Grants! It's absolutely INSANE that working hard and saving penalizes you in this broken system!!! And don't even get me started on how they look at home equity in some schools (not FAFSA but CSS Profile schools).

I felt the same way at first, but it's actually not as bad as it seems. Our family had about $110K in savings and our daughter still qualified for subsidized loans and work-study. The system definitely isn't perfect but it doesn't completely eliminate aid because of savings.

Income is definitely weighted more heavily than assets in the FAFSA calculation. With the new FAFSA simplification, they only count about 5.64% of parent assets above the protection allowance, which isn't huge. \n\nFor example, if your parents have $100,000 in reportable assets after the protection allowance, that would only add about $5,640 to your SAI (Student Aid Index). \n\nThe bigger factor is actually income. If your parents' AGI is $42K, that's relatively low and should still qualify for decent aid even with some savings.

wait i thought it was 20% of assets? my cousin's college advisor told her that last year and she moved some money around before filing

You might be thinking of student-owned assets, which are assessed at 20%. Parent-owned assets are assessed at the lower 5.64% rate. That's why it's usually better for parents to keep college savings in their name rather than the student's name.

I just went thru this with my son's FAFSA. They def look at bank accounts and investments but NOT retirement accounts. They asked for the balances on the day we filed. Pro tip: if u have big expenses coming up, pay them before filing FAFSA so ur bank accounts look smaller lol

While it's true that FAFSA takes a snapshot of your assets on the day you file, attempting to artificially reduce your assets right before filing could potentially be considered misrepresentation. It's better to be honest and remember that assets have a relatively small impact on the overall calculation compared to income.

Has anyone been able to successfully reach someone at FSA to ask these specific questions? I've been trying to call for 3 days about a similar asset question and can't get through to anyone. Kept getting disconnected after waiting for over an hour yesterday.

I had the same problem trying to get through to them about our asset questions! Then I found a service called Claimyr (claimyr.com) that holds your place in line and calls you when an agent is available. Totally worth it to not waste hours on hold. They have a video showing how it works: https://youtu.be/TbC8dZQWYNQ. The agent I finally talked to confirmed that parental retirement accounts are completely excluded, but regular savings count at that 5.64% rate people mentioned above.

Thank you! I'll definitely check that out. Did they give you any specific guidance about investment accounts vs. regular savings? Are they treated differently?

The agent explained that all non-retirement investments (mutual funds, stocks, etc.) and regular savings accounts are treated the same way - they're all considered reportable assets. The only distinctions they make are between protected assets (retirement, primary home) and reportable assets (everything else).

my brother just did the fafsa and they definitely check savings too. his efc (i mean sai now lol) went up like $3k because of their savings account. its dumb because my parents are saving for a new roof but fafsa thinks thats money for college

That's exactly what I'm worried about! My parents have been saving for years to replace their HVAC system and do some needed repairs on their house, but that money will look like it's available for my education. Seems unfair.

One important distinction to understand is that while FAFSA asks about assets, they don't factor into eligibility for Pell Grants under the new simplified formula if your family makes under $60,000 and receives certain means-tested federal benefits or qualifies based on other criteria (single parents, etc.).\n\nSo with your parents' income at $42K, depending on your family size and other factors, you might still qualify for Pell regardless of their savings. The asset information still matters for other types of aid, but Pell eligibility has become more income-focused with the FAFSA Simplification.

That's really helpful to know! We're a family of 4 with two in college (me and my older brother). Neither of my parents receives any federal benefits though. Would we still potentially qualify for Pell with the $42K income?

With two in college and $42K income, there's a very good chance you'll qualify for at least some Pell Grant. The multiple-in-college factor is still a significant benefit in the calculation. Be sure to list both you and your brother on your FAFSA (and he should list you on his).

When I filled out FAFSA for my kids last month, I noticed they really streamlined the asset questions compared to previous years. They simply asked for the total value of cash/savings/investments in one question (excluding home and retirement). They don't even break it down by account type anymore. Much simpler but still stressful!

Thanks for sharing your recent experience! That does sound simpler. Did you notice if they specifically asked about cryptocurrencies or digital assets? My dad has some Bitcoin he bought years ago, and I'm wondering if that needs to be reported.

The form doesn't specifically mention crypto, but the guidance says to include

Just to give you some concrete numbers: if your parents have $83K in non-retirement savings as you mentioned, and assuming a modest Asset Protection Allowance of around $10K (varies by age), they would have about $73K in countable assets. At the 5.64% rate, that would add approximately $4,117 to your SAI calculation.\n\nWith a $42K income and two students in college, this asset impact is unlikely to disqualify you from significant aid. Your parents' relatively low income will be the dominant factor in your aid calculation.

Thank you so much for doing that math! That makes me feel a lot better about our situation. I was really worried their savings would completely eliminate aid options, but $4,117 isn't nearly as bad as I feared.

As someone who just went through this process with my own family, I wanted to add that the timing of when you file your FAFSA can also matter for asset reporting. Since FAFSA uses a snapshot of your assets on the day you file, it's worth considering normal fluctuations in your accounts. For example, if your parents typically have higher balances right after tax refunds or lower balances after paying property taxes, you might want to time your filing accordingly. With your parents' $42K income and two kids in college, you're in a good position for aid regardless of the savings, but every little bit helps! Also, make sure to complete the FAFSA as early as possible since some state and school aid is awarded on a first-come, first-served basis.