filing-the-fafsa-2015-2016-edition

Filing the FAFSA 100
Impact of Reportable Assets on Eligibility for Need-Based Aid
A portion of parent assets are sheltered by the federal need-analysis formula, based on the age of the older
parent. This is called the asset protection allowance (APA). The asset protection allowance is intended to
be the present cost of an annuity, which would supplement at age 65 the average Social Security retirement
benefit payments to a moderate family income (as determined by the Bureau of Labor Statistics). In practice,
the formula has little connection to reality and is very sensitive to the current inflation rate. Accordingly, the
asset protection allowance may fluctuate by thousands of dollars from one year to the next. Typically, the
asset protection allowance is about $30,000 to $50,000 for parents of college-age children.
The simplified needs test, discussed earlier, may cause all assets on the FAFSA to be disregarded if the
parent income (for a dependent student) or the student’s income (for an independent student) is less than
$50,000, subject to certain other criteria.
Any remaining parent assets are assessed on a bracketed scale, with a top bracket of 5.64 percent. This
is in contrast with a dependent student’s assets, which are assessed at a higher flat rate of 20 percent
without any Asset Protection Allowance. Often, a family can increase the student’s eligibility for needbased
student aid by saving in the parent’s name, instead of the student’s name. If the family saved
money in a custodial account, such as a Uniform Gift to Minors Act (UGMA) or Uniform Transfer to
Minors Act (UTMA) account, moving the money into a custodial 529 College Savings Plan will cause it to
be reported as a parent asset on the FAFSA, if the student is a dependent student.