Key Takeaways
- Every school requires the FAFSA to apply for need-based financial aid.
- Some schools require the CSS Profile in addition to the FAFSA.
- Both the FAFSA and the CSS Profile consider student and parent income and assets when measuring a family’s ability to pay for college, although each application may consider them differently. Be sure to report these figures correctly on each application!
- Most students are considered dependents of their parent(s) for need-based financial aid purposes, so parent information must be reported.
- Need-based financial aid eligibility is heavily influenced by parent income, less so by parent assets.
When it’s time to apply for financial aid, most students will fill out the FAFSA, but some students will fill out the FAFSA and CSS Profile. So, why two forms? And for what purpose? Certified Financial Planner Ann Garcia breaks down the differences between these two financial aid applications.
A quick overview
The Free Application for Federal Student Aid, commonly referred to as the FAFSA, is the primary application that is required by all institutions to apply for need-based financial aid. It collects income and asset information from both student and parent(s) to measure the family’s ability to pay for college. This measurement is called the Student Aid Index or SAI. The SAI is used to determine eligibility for federal, state and sometimes institutional need-based financial aid. The first “F” in FAFSA is “Free,” so there is never a fee to submit this application.
The CSS Profile is an additional need-based financial aid application that is used by about 250 private institutions. These institutions want to collect more information than the FAFSA does before awarding institutional need-based financial aid. Like the FAFSA, the CSS Profile collects income and asset information from both student and parent(s) but is far more comprehensive. The CSS Profile’s measurement of a family’s ability to pay for college is called the Expected Family Contribution or EFC. The EFC is used to determine eligibility for institutional need-based financial aid at those institutions that require it. The CSS Profile is a fee-based form, although some applicants are exempt from this fee.
Institutions subtract the family’s ability to pay for college from their cost of attendance (tuition, fees, housing, meals, books, supplies, personal expenses and transportation) to determine the student’s financial need. If an institution determines that financial need exists, then need-based financial aid may be awarded. Need-based financial aid comes in two forms: free money (grants, scholarships) and self-help (loans, work-study).
If an institution requires the CSS Profile, students will need to submit the FAFSA as well. Ann explains, “You never do the CSS Profile without the FAFSA because in order for the college to award any federal dollars as part of your aid package you have to have completed the FAFSA.”
Who completes which form?
When it comes to the FAFSA and CSS Profile, most students are considered dependents of their parent(s). A student is only considered independent if they meet certain specific criteria, such as being aged 24 or older, being married, having a child they support, being a veteran of the armed forces, being a ward of the court or in foster care since the age of 13, or being in a legal guardianship, amongst others. As a result, “Both the student and the parents fill it out,” says Ann. But there are differences between the applications for parents.
On the FAFSA, a parent is considered a biological or adoptive parent. In the case of married parents or unmarried parents who live together, one parent completes the application on behalf of both parents. If parents are divorced, separated or have never been married, then the parent that provided the student with more financial support in the last year is considered the custodial or contributing parent. This may not necessarily be the parent with whom the student lives. If both parents provided equal support to the student in the last year, then the parent with the greater income and assets is considered the custodial or contributing parent. If that parent is married/remarried, then that parent must also include information for their current spouse (the student’s stepparent). The parent that provides less financial support (or has less income and assets) will not have their information reported on the FAFSA at all.
Like the FAFSA, the CSS Profile collects parent information in a similar manner with married parents or unmarried parents living together reporting their joint information. However, when it comes to parents that are divorced, separated or have never been married, the custodial or contributing parent will complete the CSS Profile (with their current spouse’s information, if married/remarried) and the noncustodial parent (the parent that provides less financial support or has less income and assets) may be prompted to complete a separate application called the Noncustodial Parent Profile. While some institutions may only consider one parent’s information, most want to examine the financial details of both parents to gain a broader understanding of the family’s financial strength.
Income consideration
“Previously it was the case that the same inputs went into both forms, and so the strategies that you would use were the same for both forms. But now there’s this divergence in how income is being treated,” says Ann.
The FAFSA now focuses on total income derived from the tax return. The formula takes your adjusted gross income and adds any untaxed income on your tax return, including IRA contributions, self-employed retirement plan contributions, Roth IRA distributions, and untaxed interest income. The formula also subtracts for actual federal tax liability, sourced from the tax return.
The CSS Profile takes a broader look at total income from all sources, including W-2 forms in addition to tax returns. The formula adds back untaxed income from various sources, like contributions to 401(k), 403(b) and HSA. Unlike the FAFSA, the CSS Profile requires you to report gifts or money paid on your behalf.
“People engage in a lot of strategies to hide their assets, but it’s really your income driving the formula,” says Ann. On the FAFSA, only about 5% of parents’ assets are considered as available for education as compared to up to 20% of parents’ income.
An important consideration with income is the base year that is used to determine eligibility. For the FAFSA and the CSS Profile, income is based on the “prior, prior” year. For instance, if the student will enter college in the Fall of 2027, then you would use 2025 federal tax information. So, for families with high school seniors, your income year will start January 1st of their sophomore year and end December 31st of their junior year. It’s important to keep this in mind as you plan for need-based financial aid.
Asset consideration
Reporting assets on the FAFSA and CSS Profile varies significantly. Ann covers some of the major differences:
Home Equity
On the FAFSA, do not include the equity in your primary residence. If you own more than one residence, only report the equity in the secondary residence(s). Equity is determined by taking the current market value and subtracting any outstanding mortgage.
On the CSS Profile, include the equity of your primary residence and any secondary residence(s). The treatment of home equity varies among institutions. Some consider the full value, others cap it at a multiple of the parents’ income, while others exclude it entirely.
Retirement
On the FAFSA, do not include the value of any qualified retirement accounts (i.e. 401K, 403B, IRA, Roth IRA, pension, etc.).
On the CSS Profile, include the value of all qualified retirement accounts. Most institutions do not include these assets in their need-based financial aid evaluation, but they do review them.
Business/Farm Value
To clarify: On the FAFSA, do not include the value of a business with 100 or fewer full-time (or full-time equivalent) employees or the value of a family farm on which the family resides.
On the CSS Profile, include the value of any business or farm.
529 Accounts
On the FAFSA, only report 529 balances belonging to the student applicant. Be sure to report these as a parent asset. Do not include 529 balances for any other children.
On the CSS Profile, report 529 balances for all children as a parent asset.
Some families might consider rolling over their oldest child’s 529 into a sibling’s account, but Ann cautions against this. “There are rules about how frequently you can do rollovers, and you might find you’re a little short of money to pay tuition if you did that.”
Ann advises families to consider strategic moves, like contributing to a Roth IRA since retirement assets are excluded from both formulas. Families might also consider moving some of their student’s savings into a parent-owned 529 account to receive more favorable treatment since student’s assets are considered at a higher rate than parents’ assets.
Choosing the right filing date is crucial too, considering that assets are reported as of the day that the FAFSA and CSS Profile are submitted. Families can strategically time filing to align with Roth IRA contributions or to account for bills and expenses that may reduce asset values. Additionally, planning around bonuses or equity compensation payouts can influence the aid calculation.
When to file
“We hear so often, ‘You have to file the FAFSA right when it comes out. You have to file a FAFSA right when it comes out.’ You don’t,” says Ann.
Only applicants eligible for “state-based grant programs that are awarded on a first-come, first-served basis where there are limited funds” should consider filing as soon as possible. Everyone else should align their filing date around the institutions’ FAFSA submission deadlines.
Ann points out, “Although financial aid eligibility is calculated by the FAFSA and the CSS Profile, financial aid is allocated by the colleges themselves, and so they do not need to see your FAFSA until they have made a decision about whether or not to admit you.”
Sibling discount
Prior to the 2024-2025 academic year, the FAFSA factored in how many dependent children in a family were attending college as it related to the family’s ability to pay for college. For example, if the FAFSA measured a family’s ability to pay for college at $20,000 and just one student was attending, then that full $20,000 was meant to be directed to that one student. But if the same family had two students attending college, then $10,000 was meant to be directed to each student. This was referred to as the “sibling discount.” With the FAFSA Simplification Act, greater allowances were given for protecting income and assets and, as a result, the sibling discount was removed.
Planning with net price calculators
“If you are a high-need student who is working hard to make sure that your FAFSA and your CSS Profile are as advantageous to you as possible, there’s an additional step you need to take, which is researching financial aid policies at the colleges you’re looking at,” says Ann.
What students can do is check out the net price calculator on each college’s website. It’s a valuable tool that shows the estimated costs of attending that specific college. While these estimates aren’t binding, they can illustrate a college’s level of generosity and be used at various stages of the college planning process.
Final tips
Assessing need-based eligibility
Keep in mind that the institution’s cost of attendances less your Student Aid Index equals the student’s financial need. So, if your Student Aid Index is higher than the cost of attendance at an institution, you may not be eligible for need-based financial aid. In that case, Ann recommends “give yourself a break” from strategizing on the FAFSA. She still recommends families fill out a FAFSA to be eligible for federal student loans or to create a baseline in case their financial circumstances change.
Reviewing tax returns
Before filing, review your tax return, paying close attention to IRA or 401(k) rollovers. Correctly reporting these rollovers is crucial on the FAFSA to avoid potential issues with financial aid eligibility.
Importance of college choice
“Neither [form] is the tooth fairy,” cautions Ann. The most generous financial aid normally comes from the colleges themselves. Ann suggests that need-based families look for colleges that tend to be generous.
