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Help a Reader: FAFSA Questions and Answers (Part 1)

I get a number of questions/emails from readers and I respond to every one of them. The following represents a sampling of FAFSA questions received over the past couple of months. Hope this helps…

Question 1: We are filling out the FAFSA application with my son. My father (the student’s grandfather) owns a rental business in which I (student’s father) am 1/6th owner. I’ve been issued non-voting common stock in the company, along with my siblings, but we receive no income. However, my stocks have an estimated value of $500,000. Is there a way to list this on the application but also explain that this provides us with no income? Not sure if this makes sense, but listing $500,000 in stock makes us sound a lot more well off than we really are! Thanks for any guidance you can provide.

Answer 1: Unfortunately, the stock will have to be listed on your FAFSA in the asset column. The only thing you can do is reach out to the Financial Aid Office at the college and explain your situation to them to see if they can utilize professional judgment to adjust your EFC and corresponding financial aid package.. They may not be able to do anything but it never hurts to ask…

Question 2: Hello, my question is about a divorced student.  All of the answers I see are for students with divorced parents.  My divorce was final last week, and I really want to continue my education.  With my ex-husband’s income on our most recent tax paperwork, our income shows over $120,000.  Without his income, it will fall to under $40,000.  Is it possible to show this shift in income while filling out the FAFSA??  Are there other considerations I should be aware of as a new divorcee seeing financial aid?

Answer 2: As long as your divorce is final before you complete the FAFSA, you are not required to include your ex-husband’s asset and income information on the FAFSA. You will only be required to reference your information.

Follow-up Question 3: I guess my confusion is how to pull the information from the tax returns.  We filed jointly, and our “adjusted gross income” is combined.  How do I pull just MY adjusted gross income out of that?  Very confusing!  A step-by-step manual for new divorcees would be a blessing! 😀

Follow-up Answer 3: Not a problem… You will just need to reference your individual W-2’s and probably do a mock-up of your taxes for last year (as if you were filing individually). Any additional income or deductions that you shared with your ex-husband will need to be pro-rated by 50%.

Question 4: Our family owns and operates a small farm.  We do not reside on this farm, but we operate a cattle operation, renting additional hay land and pasture to feed the cattle.  Our crop land is rented out to other people, but we sometimes graze this land after the crops have been harvested.  What portion of the assets from this farm should be reported on the FAFSA?

Answer 4: The good news is that as long as you “materially” participate in the operation of the farm you do not need to report it as an asset on the FAFSA.    It is excluded regardless of whether you reside on the property or not.

Question 5: My son in law is attending an accredited university overseas, in Israel.  He has dual citizenship — US and Israeli.  He would like to apply for a student loan via FAFSA.  He will turn 25 in September.  He served in the IDF (Israeli Defense Forces) for nearly five years.  His current status is that of a reserve duty soldier, meaning he periodically is called into service for a brief period of time.   The question is if the requirement for registering for Selective Service as part of the FAFSA, is still a viable requirement considering his situation?  Would such a situation enable him to have that requirement waived?  If not, and he still has to register with the Selective Service, what does that mean in practical terms?

Answer 5: Yes… your son-in-law, as a dual citizen and regardless of where he is taking up residence, is required to register for selective service if he wants to gain benefit of any of the federal loan and grant programs offered through the FAFSA.

The hope is that the US never implements the draft and calls him up to duty. However, in the unlikelihood that this this ever happens, he may be able to get a pass on being enlisted because of his commitment to the Israeli Defense Forces.  May be viewed as a conflict of interest…

Question 6: I was recently filling out my FAFSA and wasn’t sure how to accurately answer the question pertaining to assets. I’m hoping you may be able to help.  The FAFSA asks whether or not an individual has more than $2700 in assets.  I do technically have more than that in my bank account, however the majority of that money is from my current student loan that is being used to support me through school this year and will ultimately need to be paid off.  In addition, I have outstanding student loans that will need to be paid off upon graduation in addition to the loan I currently have in my bank account.  So overall, with the total amount of  debt I carry, I have less than $2700. it seems strange that my financial aid would keep me from being awarded more financial aid.

Answer 6: Unfortunately, regardless of the source (student loans) of the cash in the bank, you still have to report it as an asset. The only option you have is to gift the money to someone else or spend it prior to completing and submitting your FAFSA form if you don’t want it included in the EFC calculation.

For students, the EFC calculation basically states that you can spend 20% of your current assets on college expenses in the coming academic year. So if you have 3000 in the bank, automatically $600 will be earmarked by the FAFSA for you to spend next year toward your college expenses (regardless of your student loan debt- which doesn’t seem quite fair).

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2 Responses to “Help a Reader: FAFSA Questions and Answers (Part 1)”

  1. Mary says:

    Doug – Please post a correction to your answer for Question #6 – you indicated:”Answer 6: Unfortunately, regardless of the source (student loans) of the cash in the bank, you still have to report it as an asset. The only option you have is to gift the money to someone else or spend it prior to completing and submitting your FAFSA form if you don’t want it included in the EFC calculation.”

    This is incorrect guidance. Question #40 on the FAFSA reads: “As of today, what is your (and spouse’s) total current balance of cash, savings and checking accounts? Don’t include student financial aid.”

    This is on the 2012-2013 and 2013-2014 FAFSA. I don’t have access to the 2011-2012 FAFSA anymore, but having worked in financial aid for about 24 years, the Feds have always instructed that money awarded in the current aid year is not considered available for next year, so it is not counted as income (unless a taxable portion of grant/scholarship, etc.) or as cash/checking/savings. And unless they took their student loan/grant money and purchased an asset such as stocks, bonds, etc., it would not be an asset either.

    Thank you!

    • Doug Schantz says:

      Hi Mary! Thank you for your comment. I appreciate it. I just utilized a “life-line” and contacted my long-time (3 decades) Financial Aid Director mentor regarding your analysis. His opinion is that any cash a student has in the bank (regardless of the source) should be included as an asset on the FAFSA. He stated that a student should definitely NOT list their Financial Aid Award Package/Scholarships as an asset – which apparently is a common occurrence. But cash is always counted as an asset.

      I also researched the detailed guidance provided by the Department of Education for that asset question and it lists a number of things to NOT include but it does not make mention of cash in the bank that is the result of excess financial aid.

      So, based upon this, I think I have to stand by my answer above unless a more definitive answer is provided. I will be following up with my contacts at the Department of Education to see if they can provide clarity on the topic because it does appear that it can be a “gray area” and interpreted a couple different ways.

      Thanks again for your comment. I always enjoy interacting with the readers at