Are retirement funds considered on financial aid forms?

The federal FA formula protects some parental assets such as retirement funds (for example 401(k)s or IRAs, the home equity in the primary residence or a family farm). Some colleges require a secondary financial aid form (the CSS Profile) which has a different methodology from the federal methodology. Certain colleges also might have their own institutional forms. Each methodology varies in its assessment of family assets. Research each college’s requirements carefully through the Financial Aid section of the website and do not hesitate to contact the financial aid officer at a college with specific questions. Follow instructions carefully.

Retirement funds are not factored into the EFC (estimated family contribution) generated by the FAFSA. The EFC serves as the base for calculating financial need at most colleges and universities. However, retirement fund information is collected through the CSS/Profile form and will likely be incorporated into aid distribution decisions for colleges requiring this form.

The account value isn’t, but the contribution is added back to the AGI (Adjusted Gross Income – 1040 Line 37) and then assessed. In many cases the loss in financial aid is greater than the tax savings on the contribution! Check with a financial aid professional for the best way to benefit from this.

According to a source, pre-taxed contributions are not considered assets but are counted as untaxed income. If a contribution is made possible with post-tax dollars, it is not included on the FASFA worksheets. (Source: FinAid).

Parents’ retirement funds are not considered. Financial Aid packages are put together based on a families ability to absorb the cost of education over time.

It is not used for financial aid qualification but it is considered as a funding source for students.

No. They are a sheltered asset. Never take money out of your retirement funds to pay for college.

Retirement funds are NOT considered on financial aid forms. Neither are annuities or cash value life insurance.

When it comes to the financial aid formula, certain assets count more than others, and still other assets are exempt entirely. Retirement funds are exempt and should NOT be included as assets on the FAFSA. These include IRA, Roth IRA, 401K, 403b, 457, Keough, SEP, Simple IRA, Pension or any other qualified retirement plan. Including these assets will only inflate the EFC and endanger your student’s financial aid eligibility. The CSS Profile asks for retirement account balances, but these are not directly included in the formula to determine how much aid is awarded. It is very important to understand which assets count and which do not when completing financial aid forms, as this could either save or cost a family thousands of dollars.