Photo by Scott Graham on Unsplash
October 1 marked the first day that students and parents can complete the Free Application for Federal Student Aid for college –aka the FAFSA form. Already my inbox is receiving emails from parents with questions about how to complete the form.
I am always happy to field questions from concerned parents who want to know how to pay less for college. If one parent has a question, others probably do as well.
One parent asked, “What is the net worth of my assets?” Specifically, this parent was referring to question 89 on the FAFSA form where it asks about the value of real estate and other assets.
Here is my response:
Net worth is the difference between the current market value of an asset and what you owe on it. When it comes to real estate, it refers to the difference between the value of your property less your mortgage balance. So, if your property is worth $200,000 and you have a $150,000 mortgage, the net worth of that asset is $50,000. This is the number to provide on the FAFSA form.
If the real estate in question is a rental or investment property, then you should include it on the FAFSA form. If the real estate is your primary residence, do NOT include it on the FAFSA form. Your primary residence is an exempt asset.
Other assets to report on the FAFSA include brokerage accounts, college savings plans, accounts held in your student’s name and other financial assets. To value these assets, you will need to report their market value as of the day you complete the FAFSA form.
Do not report IRAs, Roth IRAs, 401(k) or 403(b) plans, annuities or other retirement assets. These are exempt from the financial aid calculation.