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

Understand how your family’s financial situation is weighted in the FAFSA, how financial aid eligibility is determined and strategies to consider before your student applies for financial aid.

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 (Free Application for Federal Student Aid) is the universal application required by every higher education institution for students to obtain federal aid, including loans, grants and work-study jobs. While it can be stressful to navigate, the FAFSA should be filled out by all students regardless of their parents’ income.

We will help you understand how the FAFSA works and evaluate strategies as you save for education and before you apply for potential aid.

In this article

What is the FAFSA and how does the FAFSA work?

The 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:

  • Student Aid Report, which summarizes the type and amount of aid a student can expect
  • Expected family contribution (EFC), which is an estimate of the family’s financial strength, not a prediction of what the family is expected to pay. (In fact, starting in July 2023, the EFC will be renamed the Student Aid Index to reflect its role more accurately in aid calculations.)

Here’s how the FAFSA process works:

  1. The student and family work to complete the FAFSA together, and then submit the form to the government.
  2. The government generates a Student Aid Report and sends these results to the schools listed in the student’s FAFSA application.
  3. Each school generates the student’s financial aid package, which is determined by subtracting the EFC from the cost of attendance. 

School’s cost of attendance – expected family contribution = Financial aid package

Why all students should complete the FAFSA

Even if you think your income is too high for your student to receive financial aid, they 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 when distributing merit-based aid.

How the FAFSA counts income and assets


Parental and student income are the primary factors in how the FAFSA calculates financial aid, though those two things are counted differently in determining a family’s expected contribution.

  • Parents are expected to contribute between 22% and 47% of their available income as part of the family’s expected contribution toward the cost of schooling.
  • Students are expected to contribute 50% of their available income. 

Advice spotlight

Consider reducing taxable income

To reduce taxable income in the years leading up to the FAFSA, families may consider strategies such as increasing retirement account and HSA contributions. Since parents and students are expected to contribute a certain percentage of their available income, this strategy may reduce the total amount of their expected contribution.


Assets owned by the parents and students are also part of the FAFSA calculations, though not everything is considered reportable and must be disclosed.

As with income, assets are counted differently under the FAFSA, depending on who owns them.

  • Students are expected to put 20% of their assets toward paying for college.
  • Parents, on the other hand, are expected to contribute up to 5.64% of the value of their assets toward the cost (after subtracting a small asset protection allowance). 

Advice spotlight

How to be strategic about student assets

Since assets owned by parents and students are a factor in the FAFSA calculations, consider redirecting assets from student-owned custodial accounts before completing the FAFSA, if applicable. This adjustment may reduce the amount that students are expected to personally contribute to their education costs.

What assets must be reported on the FAFSA?



  • Real estate (other than the family’s primary residence)
  • Primary residence
  • Bank accounts, including checking accounts, savings accounts and CDs
  • Qualified retirement plan accounts, including 401(k), Roth 401(k), 403(b), 457, pensions, annuities, IRA and Roth IRA accounts; 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 and boats

How gifts from grandparents (and others) are treated under the FAFSA

Beginning in 2022, assets owned by grandparents (or anyone other than a custodial parent) that will be used to cover educational expenses — like a 529 plan — don’t need to be reported on the FAFSA. Additionally, parents do not need to report gifts as untaxed income, though gifts are included in the parents' assets section of the FAFSA.

This wasn’t always the case. In the past, distributions made from accounts, like a 529 plan, needed to be reported by the student as untaxed income, which could significantly impact the amount of aid the student was eligible for.

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 counts a greater percentage 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 only the custodial parent.
  • 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.

Key dates and common mistakes

Below are the key dates for each application for the 2024-25 academic year. 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.


Application window opens

Application window closes


Oct. 1, 2023

June 30, 2025


Oct. 1, 2023

Varies by institution

Avoid this common mistake: You must renew your FAFSA for each academic year you’re in school or you won’t qualify for additional federal financial aid.  

Questions to discuss with us

  • Can we discuss strategies to reduce taxable income — such as increasing retirement account and health savings account (HSA) contributions — in the years leading up to filing the FAFSA for my student?
  • Can we explore whether certain strategies to reduce my student’s nonqualified assets prior to completing the FAFSA — such as redirecting assets from student-owned custodial accounts — would be beneficial for my family?
  • Can you evaluate my progress toward my education savings goal and provide recommendations on optimizations?

We’re here to help make this process less stressful

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