FAFSA and Assets
After completing the FAFSA, you will be given an EFC (Expected Family Contribution). This number represents the amount of money the government believes you can afford to put toward college education costs. The government calculates this number by examining your family’s income, assets and other household information.
The Federal Methodology that is used to calculate your EFC counts some parental assets and excludes others. The more accessible your family assets are, the higher your EFC. The following assets are excluded from the federal methodology:
- Retirement accounts (e.g., 401(k)s, all IRAs)
- Cash value life insurance
- Home equity in primary residence
- Personal items (e.g., cars, furniture)
- A family farm
Accessible assets are all other assets of the parent and student. These include your checking and savings accounts, money market accounts, certificates of deposit, stocks, bonds, mutual funds, US Savings bonds, certain 529 plans, trusts, limited partnerships, vacation homes, investment properties and business assets.
The federal methodology does have an asset protection allowance that lets you protect a certain amount of money from the final tally. This asset protection allowance is based on the age of the oldest parent – the older the parent, the greater the allowance.
Note: There are certain campuses that use the federal methodology and also their own institutional methodology. These campuses (many of which are Private institutions) may require additional financial aid forms (like the CSS Profile). Those colleges may look at some or all of the assets that the federal methodology excludes (like home equity, retirement accounts, etc).
Understanding the FAFSA and financial aid can be confusing… let us know if we can help make the process less confusing!