What Net Worth of Parents Investments Means on FAFSA
On the Free Application for Federal Student Aid, parents report the net worth of their investments as part of the Expected Family Contribution. Net worth is the current market value of assets minus any related debt. This includes real estate, stocks, bonds, mutual funds, and business property, but excludes the primary home and retirement accounts.
Which Investments Are Reported and Which Are Excluded
Reported investments include taxable brokerage accounts, 529 plans not owned by the parent, rental property equity, and business assets. Excluded items are the parents' primary residence, qualified retirement accounts such as 401(k) and IRA, and cash value life insurance. The FAFSA uses a formula to assess parental assets and apply a protection allowance based on age and household size.
How Investment Net Worth Affects Financial Aid
Parental investment assets are assessed at a rate of up to 5.64 percent, meaning a portion of their value reduces eligibility for need-based aid. Higher net worth can lower the aid amount, while lower net worth may increase it. Student assets are assessed at a higher rate, so moving assets between parents and students can change outcomes.
Tips for Reporting Accurately
Use the most recent statements to value investments as of the FAFSA filing date. Report only what is legally owned by the parent. If divorced, the parent who provides more financial support typically reports the investments. For detailed guidance, visit studentaid.gov.
