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Many CSS Profile colleges elect to count your home equity as a parent asset when calculating your ability to pay for college, a.k.a. your Student Aid Index. Though home equity can be a factor, there are big differences in just how much of a factor it will be at a specific college, depending on its institutional financial aid policies.

When counted, your ability to pay increases by 4 – 5% of the amount of home equity included as a parent asset. Let’s say home equity included were $100,000; that would increase your Student Aid Index – or ability to pay – by $5,000.

Three approaches to using Home Equity

1) No Home Equity

Even though information about your primary home is submitted on the CSS Profile, these colleges do not factor this information in when totaling parent assets available to pay for college. Home equity does not increase your ability to pay nor impact your student’s aid eligibility.

2) Full Home Equity

These colleges believe home equity is a key part of your overall net worth. They include 100% of your home equity when totaling parent assets available to pay for college.

3) Cap Home Equity

These colleges cap the amount of home equity they count as a parent asset relative to your income. They compare the capped amount of home equity based on your income to your full home equity and use the lesser amount. When the capped amount of home equity is less than your full home equity, they will substitute that amount when counting parent assets. Here are three examples of how this calculation works.

Example 1: Amherst College

Policy: Caps home equity at 120% of parent income.
Parent income = $150,000
Home Equity (Market Value – Outstanding Mortgage/Debts) = $300,000
Home Equity Cap as a multiple of parent income (Parent income x 120% cap) = $180,000

Instead of using $300,000 of home equity, Amherst Financial Aid will substitute $180,000 of home equity when totaling parent assets as part of the net worth available to pay for college.

Example 2: Swarthmore College

Policy: Caps home equity at 150% of parent income.
Parent income = $150,000
Home Equity (Market Value – Outstanding Mortgage/Debts) = $300,000
Home Equity Cap as a multiple of parent income (Parent income x 150% cap) = $225,000

Instead of using $300,000 of home equity, Swarthmore Financial Aid will substitute $225,000 of home equity when totaling parent assets as part of the net worth available to pay for college.

Example 3: Emory University

Policy: Caps home equity at 240% of parent income.
Parent income = $150,000
Home Equity (Market Value – Outstanding Mortgage/Debts) = $300,000
Home Equity Cap as a multiple of parent income (Parent income x 240% cap) = $360,000

In this case, because the capped amount of home equity exceeds the full home equity, Emory Financial Aid will use the $300,000 of home equity when totaling parent assets as part of the net worth available to pay for college.

Understanding each college’s policy on using home equity

You can use the information below to get an initial understanding of how CSS Profile colleges will count home equity as a parent asset. Depending on your home equity and a college’s policy, home equity may be a significant swing factor in the institutional financial aid offered by a CSS Profile college.

Parent assets reported on the FAFSA impact a student’s aid eligibility. For many families, the amount parents are expected to contribute from assets reported can be as high as 5.64% per year, with a rough average of 5%. The values of any reported assets are the values on the filing date.

There are three notable changes to reporting parent assets on the 2024-25 FAFSA.

1) Child support received

If the parent received child support for any of their children, that amount is now reported as a Parent Asset instead of parent untaxed income.

How does the parent calculate the amount of child support received?

2024-25 FAFSA asks for the total child support received in the full calendar year before the application is submitted. This may not be the same as the 2022 tax year used for the 2024-25 FAFSA. For example, if the parent is completing the asset section in January 2024, then the parent should report the total child support received in 2023, not 2022.

2) Business or farm owners

The net worth of a business or farm of any size is reported under Parent Assets. Previously, if the business or farm employed fewer than 100 full-time employees, that business or farm was exempt from reporting. This is no longer the case. This new requirement will have a large impact on some families.

How does the parent calculate the net worth of their business or farm?

Based on 2024-25 FAFSA guidance, net worth of a business or farm is the value of the business or farm minus (-) debts.

1. The value of the business or farm includes the market value of land, building, machinery, equipment, and inventory.
2. Debts of the business or farm are only debts where the business or farm was used as collateral.

What if the parent’s business is a services business, e.g., consulting, cleaning, etc…?

Most services businesses do not have tangible assets, like land or equipment, defined in the FAFSA. In this case, the business value may be $0.

3) 529 Plans owners

Starting with the 2024-25 FAFSA, parents should only report 529 Plans that benefit the student applicant. 529 Plans that benefit or are intended for siblings or other family members are no longer reported.

What if the parent has a college pre-paid plan?

College pre-paid plans are treated the same way as 529 Plans. Parents should only report the refund value of the student’s college pre-paid plan.

What are other parent assets reported on the FAFSA?

Reportable parent assets include the following:

1. Amount of cash, savings and checking.
2. Amount of brokerage accounts, not held in retirement. These may include: money market funds, mutual funds, stocks, bonds, and stock options.
3. Certificates of Deposits (CDs).
4. Educational savings accounts for the benefit of the student applicant, including: 529 college savings plans, Coverdell savings accounts, and the refund value of prepaid tuition plans.
5. Commodities.
6. Net worth of second properties. Net worth would be calculated as market value of a property minus (-) any debts owned against them.

What parent assets are not reported on the FAFSA?

Parent assets that should not be reported are:

1. Primary home
2. Retirement accounts, including: 401k, 403b, IRA, Roth IRA, Keogh plans, pension funds and annuities
3. Value of life insurance
4. ABLE accounts

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The family size, previously known as household size, will now be determined by the number of dependents claimed on the parent’s 2022 tax return. This number is part of the Federal Tax Information (FTI) shared by the IRS, so it will not be shown to the contributor on their application. The contributor can manually enter their own number in family to override that number shared by the IRS.

Does FAFSA want the number in family at the time of application or in 2022?

The number in family includes dependents living in the household that receive at least 50% of their support from the parent and will continue to receive at least 50% of support from the parent in the coming academic year (2024-25) when the student is in college. This can include non-children dependents like relatives and children who don’t live in the household because they are also attending college.

If the number isn’t shown, how does the parent know if it’s correct?

The parent can look at their 2022 tax return to total the number in family received from the IRS. The total is the parent or parents filing the return plus the number of dependents listed in the “Dependents” section on 1040, page 1.

Can the parent manually enter the number in family to be safe?

Many college access professionals suggest manual entry because of the many cases that there can be differences between the tax return and the actual number.

If the parent overrides the number in family from what is transferred, will this trigger a verification?

The Department of Education has stated that their standard verification will still be statistically driven, not driven by a manual entry of the number in college. This will not be considered “conflicting information” that a Financial Aid Administrator would be required to verify.

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Starting in 2024-25, every contributor to the FAFSA must have an FSA ID to complete their portion of the FAFSA. Contributors will go through multi-factor verification, like a push text to their phone or email to their inbox, every time they log in.

Why is every contributor now required to have an FSA ID?

The new FAFSA is an identity-based application, meaning that each contributor’s identity must be verified to process the application and for the student to be eligible for Federal Student Aid. When a contributor legally agrees to share Federal Tax Information (FTI), the IRS must know that the person giving that permission is who they say they are. This is true even if the contributor has no FTI to be shared.

How does a contributor create an FSA ID?

A contributor must have a Social Security Number (SSN) and a unique email address. The process takes a few minutes; however, the match with the Social Security Administration can take 3-5 days. For more information, see How to Create your FSA ID.

What if a contributor doesn’t have a Social Security Number?

The Department of Education is currently setting up an alternate way for a contributor without an SSN to verify their identity and create an FSA ID. This will be through TransUnion using their “knowledge-based” identity verifying process. Current timing on the availability of this alternative method for creating an FSA ID is October 2023.

Does a contributor have to wait until the 2024-25 FAFSA is released to create their FSA ID?

No. If a contributor has an SSN, they can proactively create their FSA ID today.

If a contributor already has an FSA ID, can they still use this for the new FAFSA?

Yes. The FSA ID is a unique, life-long identifier for an individual for any engagement or interaction with Federal Student Aid.

What if a contributor can’t create an FSA ID or doesn’t want to be identified?

There will still be the option to complete a paper FAFSA. However, this paper FAFSA still requires both consent for the IRS to share Federal Tax Information (FTI) and signature to complete the application. The Department of Education will make an effort to go through the identity-verifying process once the paper FAFSA is received.

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There are new rules for which parent will complete the 2024-25 FAFSA if the student’s biological or adoptive parents are single, separated or divorced.

The primary or custodial parent is now defined as the parent who provided more financial support in the 12 months prior to application. This parent will complete the FAFSA. However, if the biological or adoptive parents live together at the time of filing, both parents will have to be contributors to the FAFSA regardless of their marital status.

There is no basis for a parent to be the custodial parent for purposes of completing the FAFSA based on the following:

1. Which parent the student lives with the most.
2. Which parent has legal custody.
3. Which parent claims the student on their taxes.

How will a student know which parent to include in the FAFSA?

The FASFA application process includes a new Parent Wizard that asks students a series of questions to determine which parent should be included in the FAFSA. FAFSA asks the student which parent provided more financial support in the 12 months prior to application.

What if the parents provided equal or 50/50 support?

FAFSA asks the student to include the parent with either greater income or greater assets.

How does the student determine who provides more financial support?

The Department of Education is not providing guidance on measuring or calculating financial support to students. This means it is solely up to the student to make this determination based on their judgment. The student’s decision on which parent provides the most financial support cannot be verified by the financial aid administrator.

What if the student doesn’t live with their parents or receives no support from their parents?

If the student is determined to be a dependent student based on FAFSA’s definition but doesn’t receive financial support from their parents, FAFSA asks the student to include the parent with either greater income or greater assets.

How does FAFSA define “separated” status?

There is no definition of “separation” in the FAFSA legislation. This means a student’s biological or adoptive parents can be informally separated, and only one parent will complete the FAFSA as long as those parents are not living together.

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All contributors to the 2024-25 FAFSA are required to provide consent to retrieve and disclose Federal Tax Information (FTI) from the IRS to the Department of Education. Once consent is provided, the IRS automatically sends FTI, eliminating manual entry of income and tax information for contributors that filed 2022 US federal taxes.

If any contributor to the student’s FAFSA does not provide consent, the student will not be eligible for federal student aid, including grants, loans and work-study. Consent is required by every contributor regardless of their US federal tax filing status.

Who is a contributor to the FAFSA?

For dependent students, contributors are:

1. The student
2. The student’s biological or adoptive parent or parents who are completing the FAFSA.
   • If the parents are married and file taxes “Married Filing Jointly”, then only one parent is required to be a contributor and can complete the entire FAFSA Parent Section. In this case, only the parent contributing must provide consent.
   • If the parents are married and file taxes “Married Filing Separately”, then both parents are required to be contributors. Each parent contributor must consent for their FTI to be shared.
   • If the parent is single, separated or divorced from the other biological or adoptive parent, then only the parent that provided the greater financial support in the 12 months prior to application would be a contributor and would need to consent. However, if that parent contributor is remarried, their spouse would be included in the parent FAFSA section. See more information, see New rules for single, separated or divorced parents.

What if the student or parent doesn’t file U.S. federal taxes or files taxes in another country?

Even in these cases, every contributor must provide consent. If no FTI is found, then the parent or student manually enters income and tax information.

What are other reasons why no Federal Tax Information (FTI) would be shared?

Every contributor must consent, but here are other reasons FTI would not be shared. In each of these cases, the contributor has to manually enter income and tax information.

• Non-tax filers. These individuals aren’t required to file taxes because they are below the income requirements for mandatory tax filing. The most common case is a student who did not earned income in 2022 or didn’t earn enough to file taxes. Parents may also qualify as a non-filer.
• Foreign tax filers. These contributors follow prompts to enter the equivalent information, converted to US dollars, from their home country’s tax forms.
• Late tax filers. If a contributor has not yet filed taxes, they must provide consent and manually enter estimates. The FAFSA system will continue to contact the IRS to check for a filed tax form after the FAFSA submission. If that FTI is later found, it will replace the manually entered information. Ultimately, if a parent is required to file taxes, the college’s financial aid administrator will be required to collect the tax forms before aid is dispersed to the student.
• Victims of identity theft. In this case, the IRS may not share information. These contributors enter income and tax information manually.
• Recently divorced or separate parents who filed jointly with their ex-spouses in 2022. Because the 2022 “Married Filing Jointly” tax return has income and tax information from both parents, but only the custodial parent is required to contribute, the FAFSA will not use the FTI shared by the IRS. Instead, that parent contributor manually enters separated income and tax information to accurately reflect earnings for that individual parent.

If the contributor filed taxes, is there still an option to manually enter income and tax information?

If the contributor filed US tax return and provides the required consent, the answer is no. The cases for manual entry of income and tax information are listed above.

Can a contributor see the Federal Tax Information (FTI) that has been shared?

No. Because FTI is considered confidential, it will not appear in the application or the FAFSA Submission Summary. Even the questions associated with that information will not be shown to the contributor.

What if a contributor doesn’t provide consent?

If any contributor to the student’s FAFSA doesn’t provide consent, the student will not be eligible for federal student aid, including grants, loans and work-study. Consent is required by every contributor regardless of their US federal tax filing status.

Can a contributor who declined consent initially, go back and provide consent later?

Yes. Any contributor that previously declined consent can log into their section of the FAFSA and provide consent. Once consent is provided and FTI is shared, manually entered income and tax information will be replaced.

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The 2024-25 FAFSA will directly receive all income from Federal Tax Information shared by the IRS after a contributor provides consent. Income not reported on the US federal tax return, primarily types of untaxed income asked for in the past, will no longer be entered. Child support received will now be entered in the Parent Asset section.

What untaxed income is no longer counted?

Untaxed income that is not reported on the US federal tax return and is no longer be counted, includes:

1. Pre-tax contributions to employer retirement plans. These include employer 401k, 403b and other pension or retirement plans.
2. Housing, food and other living expenses paid to military members, clergy and others.
3. Veterans non-education benefits.
4. Workers’ compensation.
5. Disability benefits.
6. Money received by or paid on behalf of the student.

What untaxed income is still counted?

Untaxed income that is reported on the 2022 federal tax return and counts, includes:

1. Tax-exempt interest earned (1040, line 2b)
2. Untaxed retirement distributions, including untaxed IRA distributions (1040, line 4b – line 4a) and untaxed pension income (1040, line 5b – line 5a)
3. Tax deductible payments to a traditional IRA (Schedule 1, line 20)
4. Tax deductible payments to self-employed SEP, SIMPLE, KEOGH and other qualified plans (Schedule 1, line 16)

What untaxed income will have to be reported?

Foreign income earned in 2022, but excluded from taxable income, would have to be reported. This is known as Foreign Earned Income Exclusion and can be found on Schedule 1, line 8d.

What if no Federal Tax Information (FTI) is shared from the IRS?

If no FTI is shared, the parent or student will manually enter income and tax information. For more information, see New requirement to consent to share Federal Tax Information (FTI).

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