1. For most families earning under $50,000, all assets are excluded.
When determining federal financial aid eligibility for dependent students, the calculation excludes both parent and student assets when the parents' combined Adjusted Gross Income (or income earned from work for non-filers) is less than $50,000, and:
- any household member received a federally means-tested benefit during 2020 or 2021 (SSI, SNAP, Free or Reduced Lunch, TANF or WIC); or
- parents were not required to file a Schedule 1 with their IRS 2020 tax return (or only filed it to report unemployment compensation, educator expenses, IRA deduction, or student loan interest deduction); or
- either parent is a Dislocated Worker.
2. A family's primary residence and retirement accounts are excluded from consideration.
The following assets are completely excluded when determining federal financial aid eligibility: the family's primary residence, retirement accounts, and family-owned and controlled small businesses.
3. There is an Education Savings and Asset Protection Allowance that may shelter assets.
Even when assets are included, the federal financial aid formula has a built-in Education Savings and Asset Protection Allowance. This allowance shelters a portion of assets for those over the age of 25, including independent students and parents of dependent students. For example, when two parents are listed on the FAFSA and the older parent is 51 years old, the Education Savings and Asset Protection Allowance is $4,000. In this example, only assets in excess of $4,000 will impact federal financial aid eligibility.
4. No more than 5.64% of remaining assets are considered available.
Of the assets that remain after the Education Saving and Asset Protection Allowance, no more than 5.64% of parent assets are considered available and impact federal aid eligibility. Often the percentage of assets considered available for education is even less than 5.64%.
5. Section 529 accounts owned by either the parent or a dependent student for the benefit of the student are considered a parent asset.
When parent information is required to determine eligibility for federal financial aid, 529 assets are counted as a parent asset if the student is dependent, regardless of whether the account is owned by a parent or the student. Counting 529 accounts as a parent asset is beneficial because no more than 5.64% of parent assets impact federal aid eligibility, where the rate for dependent student assets is 20% (if student assets are required on the FAFSA).