Not every asset a family holds counts against them on the FAFSA (the Free Application for Federal Student Aid). Whether an investment is reported depends on the type of account, who owns it, and in some cases how big it is. Knowing these rules can help guide decisions on where to hold savings before filing.
Reporting of Investments as Assets
Some investments are reportable as assets on the Free Application for Federal Student Aid (FAFSA), and some are not.
- Businesses and Family Farms. Beginning with the 2026-2027 FAFSA, the small business and family farm exclusions have been restored. Families do not report the net worth of a business with 100 or fewer full-time (or full-time equivalent) employees that they own and control, a farm on which the family resides, or a commercial fishing business. Families do report the adjusted net worth of a business with more than 100 full-time (or full-time equivalent) employees, and of a farm on which the family does not reside. This reverses the rule that applied to the 2024-2025 and 2025-2026 FAFSA, when the simplified FAFSA required all businesses and family farms to be reported regardless of size.
- College savings. Money in 529 plans, prepaid tuition plans, and Coverdell education savings accounts is reported as an asset on the FAFSA. For a dependent student, a parent-owned account is reported only if it is designated for that student; parent-owned accounts designated for the student’s siblings are not reported. Accounts owned by a grandparent or other third party are not reported at all.
- Other investments. Money in bank and brokerage accounts, UGMA and UTMA accounts, certificates of deposit (CDs), stocks, cash stuffed in a mattress, trust funds, money market funds, mutual funds, stock options, bonds, other securities, and commodities are reported as assets on the FAFSA.
- Real estate. Investments in real estate (other than the family home or a family farm on which the family resides) and rental properties must be reported as assets on the FAFSA.
- Retirement plans. Qualified retirement plan accounts, such as a 401(k), Roth 401(k), IRA, Roth IRA, pension, qualified annuity, SEP, SIMPLE, or Keogh plan, are not reported as assets on the FAFSA.
- Excluded assets. The net worth of the family home, including one on a family farm, is not reported as an asset on the FAFSA.
The intended use of the money does not matter. Money not in a qualified retirement plan is reported as an asset on the FAFSA, even if it is intended for retirement and even if the account owner is already retired. Similarly, if the family just sold their home, the net proceeds of the sale must be reported as an asset on the FAFSA even if the family intends to use the money to buy a new home.
Reporting of Investments as Income
Contributions to and distributions from retirement plans may be reported as untaxed income on the FAFSA, even if the retirement plan is not reported as an asset.
- If a voluntary contribution to a qualified retirement plan, such as a pre-tax contribution to a 401(k), is excluded from income, the contribution is reported as untaxed income on the FAFSA. This prevents a family from artificially reducing its income by increasing contributions to its retirement plans.
- Involuntary contributions to retirement plans, such as contributions to the IPERS (Iowa), KPERS (Kansas), and OPERS (Ohio) public employee retirement systems, are not reported as untaxed income on the FAFSA. This is in contrast with contributions by federal employees to the Thrift Savings Plan (TSP), which are voluntary and therefore must be reported as untaxed income on the FAFSA, like contributions to a 401(k), 403(b), or IRA.
- Distributions from a retirement plan are also reported as untaxed income on the FAFSA to the extent not already included in adjusted gross income (AGI). For example, a tax-free return of contributions from a Roth IRA is reported as untaxed income on the FAFSA.
