How to report net worth on FAFSA: Mortgages, retirement accounts, and negative equity questions

For the FAFSA net worth section, you've got some good questions. Here's the breakdown: 1. For investment properties like your rental: Yes, you subtract the mortgage from the value. Since your equity is negative ($320k value - $345k mortgage = -$25k), you would report $0. The FAFSA doesn't allow reporting negative values. 2. Retirement accounts: Good news! Your IRA, Roth IRA, and 401k are NOT reported on the FAFSA as investments or assets. Qualified retirement plans are excluded completely. The FAFSA only wants you to include investments like stocks, bonds, CDs, rental properties (with the mortgage subtracted), 529 plans, and non-retirement investment accounts. Hope this helps clear things up!

you have to be careful with rental propertys i did this wrong last year and got flagged for verification and then had to resubmit everything!!!!!!!! the mortgage only counts against the property value if the mortgage is specifically for THAT property. if you refinanced and took cash out for other stuff thats different

When I filled out FAFSA last year, I spent HOURS trying to figure this out. The FAFSA helpline was useless - was on hold for 45 minutes and then got disconnected. The retirement accounts definitely don't count (thank god!) but I'm still not 100% on the rental property rules. I ended up reporting $0 for my underwater rental and nobody questioned it. My son still got his aid package so I guess it was fine?

Just to add some clarity on the net worth requirements for the FAFSA: 1. Retirement accounts (IRA, Roth IRA, 401k, 403b, pension plans) are EXCLUDED from FAFSA calculations - this applies to both parent and student retirement accounts. 2. For real estate investments (not your primary home): - Value of property minus remaining mortgage balance on THAT SPECIFIC PROPERTY - If negative equity exists, report as $0 (never negative) - Any mortgage amount used for other purposes can't be subtracted 3. Remember that primary home equity is NOT reported on FAFSA at all 4. Other investments to include: stocks, bonds, mutual funds, 529 plans owned by the parent, investment properties, CDs, money market accounts The Federal Student Aid office has a detailed breakdown of this on studentaid.gov under the "Completing the FAFSA Form" section if you need more specifics.

I'm in the same boat as you, just finished filling out the FAFSA for my son. The net worth section was so confusing! What I learned though is that they really just want a snapshot of your current finances. So whatever the current mortgage balance is vs whatever the current market value is - that's what matters. I don't think they care about refinancing history unless you took out a separate HELOC or something. At least that's how the financial aid officer at our college visit explained it to me.

To address your follow-up question - yes, student retirement accounts are also excluded. Your daughter's $3,200 Roth IRA does not need to be reported on the FAFSA. Regarding the refinance question: Technically, you should only count the portion of the mortgage that was used to purchase or improve the specific investment property. If you refinanced and used $30K for other purposes (like braces), that $30K shouldn't be counted against the property value. So in your case: - Property value: $320,000 - Original mortgage amount used for property: $315,000 (assuming $345K minus the $30K used for other purposes) - Net value to report: $5,000 ($320K - $315K) If you're selected for verification, this is the type of calculation they might request documentation for. That said, many financial aid offices understand these nuances can be confusing and may work with you if corrections are needed.

Is anyone else frustrated that FAFSA doesn't include clearer instructions on this stuff? Like why do we have to hunt around on forums just to figure out how to fill out a government form? My daughter's college future depends on getting this right but the instructions are so vague! The SAI formula is already stacked against middle class families and then they make the form impossible to understand. Sorry for the rant, just submitted our FAFSA yesterday and still stressing about whether I did it right.

One final note that might be helpful: if you're concerned about reporting accuracy, you can always call the Federal Student Aid Information Center at 1-800-433-3243 to get clarification on specific situations like your refinanced rental property. They should be able to give you an official answer. Alternatively, most colleges have financial aid advisors who can help with FAFSA questions even before you've been accepted. They often provide more practical guidance than the federal helpline. Just remember that the FAFSA is looking for a snapshot of your current financial situation, not a comprehensive history of all your financial decisions.

Just wanted to chime in as someone who went through this exact situation last year! The advice about retirement accounts being excluded is spot on - that was such a relief when I found out. For your rental property situation, since you mentioned refinancing and using some funds for other purposes, definitely go with the conservative approach and only subtract the mortgage amount that was actually used for the property itself. One thing that helped me was keeping all my refinancing paperwork handy in case of verification. The closing disclosure will show exactly how the loan proceeds were used. Also, don't stress too much about getting it perfect - if you're selected for verification and need to make corrections, the financial aid office will work with you. The key is showing good faith effort to be accurate. Your daughter is lucky to have a parent who cares enough to get this right!