It is important to report the parent’s asset on the FAFSA. The net worth of the parent’s asset is calculated by deducting the debt secured against the asset from the most recent market value of the asset. If the debt secured by the asset is more than the value of the asset, then the net worth is reported to be zero.
NET WORTH = MARKET VALUE — SECURED DEBT
** One has to report the most recent value of the parent’s asset on the date when the FAFSA is filed. It is important because, if your FAFSA is selected for verification, then the college financial aid administrator may ask you to present a copy of the bank or brokerage account statement to document the asset’s value as of the date the FAFSA was filed.
** If the asset is owned by more than one person, then the student should report only the share owned by the student and/or parent.
Which Assets should be reported?
Not all the assets are needed to be reported on the FAFSA. Only those assets, which have an exchange value, that is, the assets that can be bought and sold should be reported on the FAFSA. Below are certain examples of the assets that have to be reported on the FAFSA:
- Brokerage Accounts
- Real Estate
- Bank accounts, including checking and savings accounts
- Certificates of Deposit (CDs)
- Stocks, Bonds, Mutual Funds, ETFs, REITs, Private Equity, etc.
- Commodities and precious metals
- Instalment and land sale contracts (including mortgages held)
- Custodial accounts, including Uniform Gift to Minors Act (UGMA) and Uniform Transfer to Minors Act (UTMA) accounts (if owner, not custodian)
- Trust funds
We would advise you- not to report the following kind of assets on your FAFSA:
- Personal Possessions like clothes, furniture, etc.
- Qualified Retirement Plans such as IRAs, Keogh, 401 (k), etc.
- The Family Home
- The Family Farm, if it is their primary place of training.
- Life insurance policies
- Property received by Native American students under the Per Capita Act, the Distribution of Judgment Funds Act, the Alaska Native Claims Settlement Act or the Maine Indian Claims Settlement Act
- Any small businesses owned and controlled by the family.
** Failing to report a reportable asset on the FAFSA is considered as a fraud. So, if you have any doubt as to whether an asset should be reported on the FAFSA, then you should consult the college’s financial aid administrator.
Let us understand about certain other reportable assets:
- Worth of other Real Estate: You are required to report the net worth of the family home even if it is excluded as an asset on the FAFSA. Try to report the recently updated worth of the real estate.
- Loans: If the student and/or the custodial parent has lent money to somebody, then he/she will have to report that money as an asset, as the money will come back to him/her.
- Rented Properties: If you have rented out your vacation home, or any other property, then it will have to be reported as an investment- not as a business. The rented out real estate is not considered as a business until it is owned by a formally recognized business, and the business must provide additional services (e.g., Maid service).
- Custodial Accounts: Most of the custodial accounts, such as the Uniform Gift to Minors Act (UGMA) and Uniform Transfer to Minors Act(UTMA) accounts have to be reported as the asset of the student. Whereas, the qualified tuition programs, such as 529 College Savings Plans are reported as an asset of the parents or the custodians.
The joint account has to be reported as an asset of both the account holders, and each account owner has to report their share of the net worth of the account.
- Home Equity Loan: If you have borrowed certain amount of cash against the Home Equity Line of Credit (HELOC), then the unspent cash has to be reported as an asset on the FAFSA.
- Funds from Trust: The trust funds have to be reported as an asset on the FAFSA, except for the involuntarily restricted trust funds that have been restricted by the court.
Any trust fund, which is under dispute in the court should not be included as an asset on the FAFSA until the dispute has been resolved.
If the trust fund has more than one owner, then you are required to report your own share of the fund on the FAFSA.
- Illiquid Assets: Illiquid assets such as restricted stock, thinly-traded stocks, hedge funds, antiques, collectibles, partnerships, real estate, corporate bonds, etc. should also be reported on the FAFSA as assets.
More Important Information About FAFSA