FAFSA and the CSS Profile: What are they and how do they work?

Understand how financial aid eligibility is determined and what to consider before your student submits the FAFSA.

For many students and families, having some type of financial aid is important to help pay for education. A critical first step in procuring this aid — whether it be merit- or need-based — is submitting the FAFSA.

The FAFSA is the universal application required by every higher education institution for students to obtain federal aid, including loans, grants and work-study jobs. While you may need to set aside time to complete the FAFSA, it should be filled out by all students — regardless of their parents’ income.

Work with us to evaluate strategies as you save for education and before you apply for potential aid.

In this article

What is the FAFSA?

“FAFSA” stands for the Free Application for Federal Student Aid. It’s a universal application administered by the U.S. Department of Education that collects information about your family’s financial situation. Using this information, it generates the following for each student:

  • A Student Aid Report, which summarizes the student’s FAFSA information and provides a high-level estimate of their financial eligibility. It is not a financial aid offer.
  • A Student Aid Index (SAI), which is an estimate of the family’s financial strength, not a prediction of what the family is expected to pay. The Student Aid Index number is determined by a formula that considers a family’s size, assets and income.

How the FAFSA works

  1. The student and family work to complete the FAFSA together, then submit the form to the government.
  2. The government generates a Student Aid Report and Student Aid Index. They then send these results to the schools listed in the student’s FAFSA application.
  3. Each school determines your financial need, which is calculated by subtracting the Student Aid Index from the cost of attendance. Based on this and additional academic information, each school will offer a financial aid package, which can consist of a combination of need-based, merit-based, scholarships and other aid.

Learn more: Understanding student financial aid

Why all students should complete the FAFSA

Even if you think your income is too high for your student to receive financial aid, your family should still complete the FAFSA.

Here’s why:

  • Multiple factors go into how financial aid eligibility is determined, so never assume you won’t get any aid.
  • In addition to need-based aid, the FAFSA is used to obtain a variety of non-need-based federal loans.

States, individual colleges and universities, and private scholarship programs also rely on the FAFSA, in part, when distributing merit-based aid.

New FAFSA rules: How changes may affect your student’s financial aid eligibility

Plan for college expenses with more confidence by staying informed of the recent FAFSA changes.

Learn more

How the FAFSA counts income and assets

Parental and student income are the primary factors in how the FAFSA calculates financial aid, though they are counted differently. Generally, parents and students are expected to contribute a certain percentage of their available income toward the cost of schooling.

Likewise, assets owned by the parents and students are also part of the FAFSA calculations. Generally, students and parents are expected to contribute a percentage of the value of their assets toward the cost of paying for college. However, not all assets are considered reportable nor must they all be disclosed.

Advice spotlight

Since parents and students are expected to contribute a certain percentage of their available income, consider ways to limit unnecessary bumps to your income. For example, capital gains distributions, retirement plan distributions and exercising stock options could temporarily impact your income, and thus your financial aid prospects.

What assets must be reported on the FAFSA?

Reportable

Non-reportable

  • Real estate (other than the family’s primary residence)
  • Primary residence
  • Bank accounts, including checking accounts, savings accounts, CDs
  • Qualified retirement plan accounts, including 401(k), Roth 401(k), 403(b), 457, pensions, annuities, IRAs, Roth IRAs; and SEP, SIMPLE and Keogh plans
  • Trust funds
  • Family farms
  • Investments, including stocks, bonds, mutual funds, ETFs, stock options
  • Life insurance policies, including cash value insurance and whole life
  • 529 plans or Coverdell savings accounts owned by parents or the students
  • 529 plans or Coverdell accounts owned by grandparents (or anyone else besides the parents or student)
  • Businesses with more than 100 full-time employees
  • Businesses with fewer than 100 full-time employees
  • Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts
  • Personal possessions and household goods, including clothing, furniture, cars, boats

The CSS Profile: What is it and which schools require it?

To receive federal student aid, students must fill out the FAFSA. But some colleges require an additional application: the College Scholarship Service (CSS) Profile.

Administered by the College Board (the organization that oversees the SATs), the CSS Profile is an online application required by many highly selective schools to determine eligibility for need-based institutional scholarships, grants or loans (from sources other than the federal government).

FAFSA vs. CSS Profile

Like the FAFSA, the CSS Profile asks for a family’s financial data, though there are important differences:

  • Asset calculations: The CSS Profile includes more of a family’s assets than the FAFSA in calculating what parents will be expected to pay for college. For example, the CSS Profile counts the following assets:
    • The value of a family’s primary residence
    • Retirement savings
    • Annuities
    • Net worth of small businesses
    • Any 529 plan that names the student as a beneficiary
  • Debts and expenses: The CSS Profile considers a family’s medical expenses, debts, mortgage status, business expenses and other costs not included on the FAFSA.
  • Treatment of divorced parents: Unlike the FAFSA, the CSS Profile takes the combined income and assets of both parents into account, not just the parent who provides more financial support.
  • Unique to each school: While the FAFSA is the same for everyone and every school, the CSS Profile allows schools to customize the form.
  • Cost: Unlike the FAFSA, submitting a CSS Profile is not free. Students whose household income is over $100,000 must pay a fee for each school.

Avoid these common mistakes

  • Don’t delay in filing your FAFSA. Try to turn in both the FAFSA and CSS as close to the opening date as possible. Schools only have so much grant money to give out. Once it’s gone, they may award loans instead. The FAFSA application window generally opens in October and closes in June.
  • Don’t forget to annually renew your FAFSA. You must renew your FAFSA for each academic year you’re in school or you won’t qualify for additional federal financial aid.

We’re here to help make this process less stressful

We will help you understand the financial considerations as you prepare to pay for college.

Questions to discuss with us

  • What steps can I take to reduce taxable income in the years leading up to filing the FAFSA for my student?
  • How can I boost my savings rate for my education goals?
  • Should my student complete the FAFSA even though my family’s household income is high?