What are Protected vs. Available Assets?

This article was written based on the information and opinions presented by Vinay Bhaskara in a CollegeVine Livestream. You can watch the full Livestream for more info.

 

What’s Covered: 

• Protected Assets: FAFSA vs. CSS Profile
• How Does Your 529 Plan Affect Your Financial Aid?
• A Note on the Importance of Available Assets

 

 

Protected Assets: FAFSA vs. CSS Profile

 

There is a difference between what the FAFSA and the CSS Profile consider protected assets, which are assets that, regardless of how much money you have in these accounts or assets, are not going to be considered in the calculations for financial aid.

 

There are also what are called available assets, which are assets that are available to be covered in this calculation or essentially available to be used to pay for college. 

 

In terms of the assets that are considered protected, your retirement accounts, such as your 401k and IRA, are protected. This is true regardless of whether you have a Roth 401k or Roth IRA, or a non-Roth 401k or non-Roth IRA. Whether you are paying taxes now or later on your retirement accounts doesn’t matter and is not considered when calculating your financial aid. 

 

If you have any money in health savings accounts, this money is also protected. This may apply to you if your family has health challenges that they end up paying for out of pocket and depends on your insurance.

 

Protected Assets and the FAFSA

 

There are some assets that are protected only on the FAFSA. 

 

The equity in your primary residence, which is the home that you live in, is protected only on the FAFSA, but different colleges will sometimes have a cap on this. Either way, however, this asset is protected, where the equity in your primary residence is the value of the primary residence minus the amount that is still left over on the mortgage – or your net equity. This is not the same as the total value of the house. 

 

Similarly, if you have a small family business or farm, the FAFSA treats these as protected assets as well.

 

Protected Assets and the CSS Profile

 

The CSS profile treats both of the examples above as available assets. Many colleges will cap the amount of equity from your primary residence, and they can ask you to take out or use these assets to pay for college, which is why this amount is capped sometimes. In terms of the value of a small family farm or business, however, those are definitely going to be treated as available assets by the CSS Profile.

 

In addition, checkings and savings account balances, other property, including vacation properties, second homes, vacation homes, and any commercial property that you own, such as large businesses, farms, or investment portfolios, are all considered available assets.

 

How Does Your 529 Plan Affect Your Financial Aid?

 

Your 529 plan is treated as a normal available asset. It is not considered any differently by financial aid applications. The value of a 529 plan is that you can save as you can set aside that money for college tax free. This was created as a tool by the government to encourage families to put away money for a college education. 

 

When it comes to your financial aid calculation, your 529 plan is just like your investment portfolio. There’s no difference in how it is treated in the calculation. 

 

A Note on the Importance of Available Assets

 

One very important note that many families do not know is that financial aid applications are looking at your available assets. They are not taking into account any debt you have, as that is not in the form of a mortgage. 

 

Therefore, if you have a personal line of credit or you have any type of substantial credit card debt, that will not be subtracted out from your available assets. Instead, this can actually be a very dangerous situation where you will be judged on the total asset value, not the net asset value.

 

How Much Will College Cost Your Family?

 

The actual cost of each college can vary significantly for the same family, and you can’t trust the sticker price to tell you your personal cost of attendance. After financial aid, expensive private colleges can actually be cheaper than in-state public schools for some families.

 

Want to estimate your cost of attendance? You can use each individual school’s net price calculator, or check out our free Financial Aid Calculator for an estimate at hundreds of schools in just 3 minutes. 

 

Our free Chancing Engine will also tell you your chances of acceptance based on your grades, test scores, extracurriculars, and demographics. Use these free tools to improve your profile and plan for your college finances!