“New FAFSA Launch: Simplifying Financial Aid Process with Potential Pitfalls to Avoid”

The much-anticipated launch of the new FAFSA (Free Application for Federal Student Aid) has finally arrived, promising to simplify the financial aid process for families seeking assistance to fund their children’s education. Despite a late rollout and some data fiascos, the new FAFSA is significantly easier to navigate, with automatic retrieval of income information from the IRS based on tax returns, eliminating the need for manual input.

However, in the pursuit of simplicity, there is a risk of misinterpreting asset-related questions if parents or guardians filling out the application are not aware of what qualifies as an asset. With three new asset-related questions on the FAFSA, it is crucial for applicants to understand the definitions and implications of their answers to ensure they do not over-report assets and potentially impact their eligibility for aid.

The first asset-related question is straightforward, asking for the amount of money in checking and savings accounts. The second question, however, lacks clarity, as it requests the net value of investments excluding the primary residence but including all other real estate. It is essential for applicants to note that investments do not include retirement plans, the value of life insurance, or ABLE accounts, as mistakenly including these items can significantly impact financial aid eligibility.

The final asset question pertains to the value of businesses and farms minus debts, with an exemption for those owning 51% or more of a small business with fewer than 100 employees. This question can be challenging for applicants who do not qualify for the small business exclusion, as determining the exact value of a business without a valuation can be difficult, and the value of a business may not be readily accessible to pay for college expenses.

As the 2024-2025 school year approaches, it is crucial for clients seeking financial aid for their children’s education to accurately report their assets on the FAFSA. The federal deadline for the FAFSA is 11:59 p.m. Central time on June 30, 2025, but states may have earlier deadlines, so it is essential to check the state’s higher education website for accurate information to avoid missing out on aid opportunities.

In conclusion, filling out the FAFSA correctly is not only crucial for federal aid but also impacts other offers from the college your child is planning to attend. Financial advisors should reach out to clients with children applying to college and ensure they are using the correct asset amounts and values for their business to maximize their eligibility for financial aid. By providing accurate information and guidance, families can navigate the FAFSA process with confidence and secure the necessary support for their children’s education.