The much anticipated launch of the new (Free Application for Federal Student Aid) aimed to simplify the financial aid process. Despite a late rollout and data fiaꦏscos, it is significantly easier.

However, in the pursuit for simplicity, there’s a risk of misinterpreting asset-related questions if the parent or guardian filling out the application is not aware of what qualifies as an asset. 

Ahead of the 2024-⛄2025 school year, here’s what clients seeking financial aid for their children’s education should know.

FAFSA Income Information

Previously, income information on the old FAFSA had to be reported using your client’s 澳洲幸运5开奖号码历史查询:tax return and other supporting tax forms. If﷽ their income wasn’t straightforward, it was easy to make mistakes.

The beauty of the new FAFSA is that income information is directly pulled from the IRS. However, clients must give consent for the IRS to share their data.

Should they worry about providing consent? The data is shared directly from the IRS to the Department of Education, so no third party ge🎃ts access. If they don’t provide permission, they will need to input their income manually, risking inelig🔯ibility for federal aid.

FAFSA Asset Information

There are only three as🎀set questions. The first is straightforward: how much does your client have in checking and savings?

The💦 second question is the most confusing. It asks for the net value of their investments, not counting their home but including all other real estate. There is no other instruction in the ﷺquestion.

When people think of investments, almost everyone includes their retirement plans. Big news! Investments do not include retirement plans, the 澳洲幸运5开奖号码历史查询:value of life insurance, or ABLE accounts. If they mistakenly inclu🏅de retirement plans, this can significan🌺tly impact financial aid eligibility.

The final asset question concerns the value of businesses and farms minus debts. This question fails to inform that owning 51% or more of a small business with fewer than 100 employees exempts one from reporting it.

Thi♏s can be a challenging question if they don’t qualify for the small business exclusion, since  it is difficult to know the exact value without getting a valuation. Also, the value of a business generally isn’t accessible to pay for college expenses.

What I’m Telling My Clients

Make sure thꦚey report only the assets that they are required to report. Save those retirement plans for retirement.

Business values can vary widely🉐 depending🐲 on the type of business and how fast it needs to be sold.

For example, if I had to sell my business today, I would get about half the amount that I would 🍸get if I sold it over a few years to help with the transition. Since the Department of Education assumes that they can tap the value of their business immediately to pay for college, use a value that assumes a quicker sale.

The Bottom Line

Filling out the FAFSA correctly affects not only federal aid, 🦩but also other offers from the college your client’s child is planning to attend. Reach out to clien🦄ts with children applying to college and make certain they are using the correct asset amounts and values for their business.