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These resources are offered to support families with college-bound students in the Los Angeles area affected by the January 2025 wildfires. College financial aid offices want to understand changes in your financial circumstances as a result of this natural disaster to comprehensively evaluate your financial need and award need-based aid.

Through a financial aid appeal, you can submit new information about the financial impact of this event to supplement and amend the information submitted on the FAFSA or CSS Profile. Through a process known as Professional Judgment, the college financial aid office will include new factors like reduction in income, extraordinary expenses, and loss of assets in their evaluation or re-evaluation of your financial aid eligibility and award.

It’s important to advocate for these changes and engage in this process early. Start with these resources and work with your college counselor for support. Reach out to the financial aid offices; they are there to help.

Financial Aid Appeal Letter Template

Use this appeal letter as a template for requesting an adjustment to financial aid.  Edit language to best reflect your personal circumstances. The italicized sections are prompts for writing.

Q&A

These are the questions asked by families during our workshop, along with answers and guidance provided.

Pell Grant eligibility

The FAFSA determines whether the student qualifies for the Maximum Pell Grant based on a parent’s Adjusted Gross Income (AGI) in the base year, family size and state of residence. When a parent’s AGI is at or below the limit based on marital status and family size, the student qualifies for the Maximum Pell Grant. The Maximum Pell Grant is determined annually by Congress, and the amount for the 2025-26 Award Year is $7,395.

In addition to receiving the Maximum Pell Grant, the student is also assigned a Student Aid Index (SAI) equal to $0. Neither student nor parent assets will be included in the calculation of the Student Aid Index.

This table provides the parent income limits for a dependent student for the three FAFSA cycles: 2025-26 FAFSA, 2026-2027 FAFSA, and 2027-28 FAFSA.

The rules on what Parent Income is included when calculating your Student Aid Index – or ability to pay for college – differ from FAFSA and CSS Profile.

FAFSA : a more limited accounting of income

The FAFSA only takes income from certain lines of a parent’s personal tax return. The personal tax return for FAFSA purposes is the 1040 and includes Schedule 1, Schedule 3, and Schedule C. For a detailed look at which amounts are included, check out this resource from Federal Student Aid with screenshots from the 2023 tax return. Overall, this limits the total income included.

CSS Profile : a broader accounting of income

The CSS Profile uses this same income as a starting point but adds additional untaxed income. The CSS Profile requires parents to submit additional income documents beyond the 1040, including W-2s, 1099s, and all business tax returns. What is the untaxed income that the CSS Profile includes? They can vary depending on a parent’s sources of income and form of employment, e.g. working for an employer or self-employed. Here are the most common examples:

• Pre-tax contributions to an employer retirement account, like a 401k, 403b, or pension.
• Pre-tax contributions to an HSA.
• For business owners, certain business deductions are allowed by the IRS but not considered outgoing expenses exclusively for business purposes, like the home office deduction or business expense of a personal car.
• For property owners, depreciation of the property is allowed by the IRS to offset rental income but is not allowed by CSS Profile for financial aid eligibility.

In each of these cases, these amounts are added back to the taxable income to calculate the income used in the financial aid evaluation. The result can be that a larger amount of income is included for evaluating need-based financial aid through the CSS Profile versus the FAFSA.

Parent Income Included in the FAFSA and CSS Profile

This table summarizes the income included in each application.

Income	FAFSA	CSS Profile
Earnings from work	Yes	Yes
Net earnings from investments	Yes	Yes
Earnings from business	Only net earnings reported on the personal tax return after all IRS-allowable deductions	Includes net earnings reported on your personal tax return and the addition of some IRS-allowable deductions
Earnings from rental properties	Only net earnings reported on your personal return after all IRS allowable deductions.	Includes net earnings reported on your personal tax return and the addition of some IRS-allowable deductions, like depreciation
Retirement distributions	Both taxed and untaxed retirement distributions reported on 1040, lines 4a/4b & lines 5a/5b	Both taxed and untaxed retirement distributions reported on 1040, lines 4a/4b & lines 5a/5b
Social Security benefits	Only taxed Social Security benefits reported on 1040, line 6b	Both taxed and untaxed Social Security benefits reported on 1040, line 6a
Unemployment	Yes	Yes
Pre-tax contributions to self-employed retirement accounts (SEP, SIMPLE, etc…)	Yes, reported on Schedule 1, line 16	Yes, reported on Schedule 1, line 16
Pre-tax contributions to traditional IRA	Yes, reported on Schedule 1, line 20	Yes, reported on Schedule 1, line 20
Child support	Self-reported as a Parent Asset, for more favorable treatment	Yes, self-reported
Disability payments	No	Yes, self-reported
Pre-tax contributions to employer retirement accounts (401k, 403b, etc…)	No	Yes, from W-2, box 12
Pre-tax contributions to an HSA	No	Yes, tax return or W-2
Untaxed alimony	No	Yes, self-reported
Additional business income offset by certain IRS deductions	No	Yes, as found on applicable business tax return
Additional rental income offset by certain IRS deductions	No	Yes, as found on Schedule E or applicable return where the property is listed

The rules for which Parent Assets are counted in calculating your Student Aid Index – or ability to pay for college – differ from FAFSA and CSS Profile. While there are assets in common, there are exceptions. This chart summarizes which Parent Assets are counted and which are protected.

Impact of Parent Assets on the Student Aid Index

When an asset is counted, the reported amount contributes roughly 5% toward your Student Aid Index. Protected Assets have zero impact on your Student Aid Index. No counted asset is weighted more than another, like a 529 or College Savings Plan. College Savings Plans also contribute 5%.

Both the FAFSA and CSS Profile require business owners to report the net worth of their business. However, the reported net worth is not counted dollar-for-dollar as a parent asset available for college. Instead, both applications calculate an adjusted net worth for a business before including it as a parent asset. The same applies to farms.

How to calculate business net worth

By FAFSA’s guidance, the net worth of a business is calculated by taking tangible assets owned by the business and subtracting debt against those tangible assets. Examples of tangible assets would be:

• Property owned by the business
• Vehicle
• Equipment
• Value of sellable goods
• Cash in the business

More favorable treatment for business assets

This more favorable treatment means that when an asset is held by a business entity, it has a lesser impact on a student’s aid eligibility. A common example is a rental property. When the rental property is titled to a business instead of directly titled to a parent, the net worth can be reported as a business asset.

Calculation for business assets

Here is the adjusted net worth calculation for the 2025-26 FAFSA (CSS Profile also follows this calculation). You can enter the net worth of your business to understand what adjusted net worth would be used when calculating parent assets available for college. The financial aid applications will calculate a roughly 5% ability to pay from this adjusted net worth.

Parent assets reported on the FAFSA impact a student’s aid eligibility. 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%. Given this, the ability to exclude assets from the calculation of the Student Aid Index can be helpful to maximize eligibility.

These are the three scenarios where a parent is exempt from reporting parent assets.

1) Student is eligible for the Maximum Pell Grant

The FAFSA determines whether the student qualifies for the Maximum Pell Grant based on a parent’s Adjusted Gross Income (AGI) in the base year, family size and state of residence. When the parent’s AGI is at or below the threshold based on marital status and family size, the student qualifies for the Maximum Pell Grant. In this case, neither student nor parent assets will be included in the calculation of the Student Aid Index. The student is assigned a Student Aid Index (SAI) equal to $0

2) Parent’s income is less than $60,000

There are two parts to this qualification.

1. The parent’s combined AGI (Adjusted Gross Income) is less than $60,000.
2. The parent filing taxes must also meet additional criteria beyond the income threshold, filing what is considered a simplified return. In this case, the parent must not file Schedules A, B, D, E, F, or H or not file a Schedule C with net business income greater than $10,000 of either loss or gain.

3) Anyone in the student’s family qualified for a means-tested Federal benefit program

If any member of the student household qualified for a means-tested federal benefit at any time in the two years prior to receiving financial aid, the parent is exempt from reporting assets. For example, the years counted for the 2025-26 FAFSA would be 2023 and 2024.

The means-tested federal programs included are:

• Earned income tax credit (EITC)
• Federal housing assistance
• Free or reduced-price school lunch
• Medicaid
• Refundable credit for coverage under a qualified health plan (QHP)
• Supplemental Nutrition Assistance Program (SNAP)
• Supplemental Security Income (SSI)
• Temporary Assistance for Needy Families (TANF)
• Special Supplemental Nutrition Program for Women, Infants and Children (WIC)

Exceptions to these rules

These rules to exempt Parent Asset reporting do not apply if:

1. the parent lives outside of the US, even when they file US taxes.
2. the parent does not file US taxes unless they don’t file because their income is below the filing threshold.

In both cases above, the parent must still report parent assets.

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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