The much anticipated launch of the new (Free Application for Federal Student Aid) aimed to simplify the financial a✤id pr꧒ocess. Despite a late rollout and data fiascos, 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 finaౠncial 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官方开奖结果体彩网:tax return and other supporting tax forms. If their income wasn’t straightforward, it was easy to make mist𝔍akes.

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 Educati🦋on, so no third party gets access. If they don’t provide permission, they will need to input their income manually, risking ineligibility for federal aid.

FAFSA Asset Information

There are only three asset questions. The first is straightforward: how much does your cl🔯ient 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 in♐struction in the question.

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官方开奖结果体彩网:value of life insurance, or ABLE 🐽accounts. If they mistakenly include retirement plans, this can significantly 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.

This 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 c✤ollege expenses.

What I’m Telling My Clients

Make sure they report only the assets that they are required to report. Save those retiremen﷽t 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.ܫ Since the Department of Education assumes that they can tap the valuꦐe 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 clients with children applying to college and make certain they are using the cor💟rect asset amounts and values for their business.