FAFSA counting IRA rollover as income - SAI quadrupled! How to fix?

This is unfortunately a known issue with how the FAFSA system interprets tax data. IRA rollovers and transfers appear on your 1040 but aren't actually income. You'll need to file a correction with supporting documentation for each school. Here's what worked for me: 1. Get a letter from your financial institution clearly stating this was a trustee-to-trustee transfer with $0 taxable distribution 2. Contact each school's financial aid office directly (don't just rely on FAFSA) 3. Submit the documentation through each school's financial aid portal 4. Follow up by phone after 7-10 business days if you don't see changes It's frustrating but schools have procedures for this. The FAFSA system won't auto-correct it.

omg the same thing happened to my mom when she rolled over her 403b last year!!! our SAI was like $90k higher than it should've been. took FOREVER to get it fixed. each school wanted different forms 🙄

The FAFSA system is BROKEN. They rushed to implement all these "improvements" and now nobody can get accurate aid calculations. I've been fighting with them for 3 months about incorrect income calculations, and every time I call I get someone different who gives contradictory information. Meanwhile my kid might have to skip a semester because we can't afford the inflated costs! Documentation means NOTHING to these people. I sent in everything and still waiting for any action.

I work in financial aid at a university and see this issue frequently. This is how to handle it properly: 1. Request a "Professional Judgment" review (sometimes called "Special Circumstances" or "Income Adjustment" review) specifically for the IRA rollover 2. You'll need to provide: - Letter explaining the situation - Copy of IRS Form 5498 showing the rollover amount - Account statements showing the transfer - Any 1099-R forms related to the distribution Most importantly, submit this directly to each school's financial aid office, not to FAFSA itself. Each institution handles these adjustments independently. They have the authority to make manual corrections to your SAI calculation. The system isn't designed to auto-detect rollovers vs. actual distributions, so this manual correction is necessary. Start this process ASAP as professional judgment reviews can take 2-4 weeks during peak season.

I had a similar issue with a Roth conversion being counted incorrectly. I solved it by reaching out directly to my FAFSA schools' financial aid offices. Have you tried using Claimyr to get through to a FAFSA specialist? When I kept getting disconnected from Federal Student Aid, I used their service at claimyr.com and got connected to an actual agent in under 15 minutes. They have a video demo showing how it works: https://youtu.be/TbC8dZQWYNQ The agent I spoke with flagged my account for special review and guided me through the documentation needed. Still had to work with individual schools, but at least my FAFSA record had notes about the issue.

wait can someone explain why rollover retirement $ counts as income? i thought that money was already taxed when u first put it in? im confused how fafsa works lol

This is a technical issue with how FAFSA processes Form 1040 data. On your tax return, IRA rollovers appear on lines 4a/4b or 5a/5b with different amounts - the gross distribution on line 'a' and the taxable amount (should be zero for a complete rollover) on line 'b'. FAFSA is incorrectly using the gross distribution amount rather than the taxable amount. The good news is that financial aid offices are very familiar with this issue. Send them: 1. Copy of your tax return showing the rollover (specifically where lines 4a/4b or 5a/5b show different amounts) 2. The 1099-R form with distribution code G (rollover) 3. Documentation from both financial institutions showing the money went directly from one retirement account to another Each school will make a manual adjustment. Unfortunately, there isn't a system-wide fix - you'll need to work with each school individually. This won't be corrected automatically by FAFSA.

I'm dealing with the exact same nightmare right now! My husband did a 401k rollover to an IRA last year and our SAI jumped from around $15k to $65k. I've been pulling my hair out trying to figure out why our expected family contribution suddenly tripled. Reading through all these responses has been so helpful - I had no idea I needed to ask for a "Professional Judgment" review specifically. I've been calling it an "error correction" which probably explains why I keep getting transferred around. One thing I'm wondering - for those who have successfully gotten this fixed, did it affect your aid awards that were already issued? My daughter's school already sent her financial aid package based on the inflated SAI, and it's basically just loans. I'm hoping once we get this corrected they'll recalculate and offer some actual grants. This whole situation is so stressful when you're already worried about college costs!

I'm going through this exact same issue right now! My mom rolled over her old employer's 401k to a Roth IRA last year and our SAI went from what should be around $8,000 to over $45,000. I'm a first-generation college student and this is all so overwhelming - I had no idea retirement account transfers could mess up financial aid calculations like this. Thank you everyone for the detailed explanations about Professional Judgment reviews and the specific documentation needed. I'm definitely going to gather all the forms you mentioned (the 1099-R, account statements, etc.) and contact each of my schools directly. One quick question - should I mention in my letter that I'm first-generation and this was an honest mistake due to not understanding how these transfers affect FAFSA? Or should I just stick to the technical facts about the rollover? I don't want to sound like I'm making excuses, but I also want them to understand we weren't trying to hide income or anything like that. This community has been such a lifesaver - I was starting to think I might have to skip my freshman year because of this!

This is such a widespread issue this year! I'm a financial aid counselor and we've seen a huge uptick in IRA/401k rollover problems with the new FAFSA system. The automated tax data retrieval is pulling gross distribution amounts instead of taxable amounts, which creates these massive SAI inflations. A few additional tips from what I've seen work best: 1. When you submit your Professional Judgment request, include a cover letter with "IRA ROLLOVER CORRECTION" in the subject line - this helps our office identify and prioritize these cases immediately 2. If possible, get your tax preparer or financial advisor to write a brief letter confirming this was a non-taxable rollover event. Having a professional verify the situation often speeds up the review process 3. Don't wait for schools to process corrections before applying for additional aid programs. Many state and institutional deadlines are coming up soon, and you can always update those applications once your SAI is corrected The silver lining is that once one school processes your Professional Judgment documentation, you can reference that decision when contacting other schools - it sometimes helps expedite their review process. Hang in there, everyone dealing with this. Your persistence will pay off and you'll get the aid you're entitled to!