NC FAFSA & CSS Profile Asset Rules: Maximize 2025 Aid
Paying for college can feel overwhelming—especially when you’ve worked hard to save and wonder whether those savings will hurt your student’s financial aid.
The truth is: not all assets are treated equally, and understanding how the 2025 FAFSA and CSS Profile count (or ignore) different types of assets can save your family thousands of dollars.
This guide explains six critical asset rules every North Carolina family needs to know—plus special tips for small-business owners and parents who are self-employed.
Free Resource: Download the Ultimate College Blueprint to estimate your aid eligibility and start planning today.
1. Retirement Accounts: Your Safe Harbor
FAFSA/SAI (2025 rules): Balances are not counted as assets.
Your 401(k), traditional IRA, Roth IRA, and other qualified retirement accounts are excluded when FAFSA calculates your Student Aid Index.
Planning Tip:
Leave retirement funds untouched if possible. Withdrawals—especially from a Roth IRA—are treated as untaxed income in the FAFSA base year (the tax year two years before the academic year).
Higher income means a higher SAI, which reduces aid.
Special Note: SEP IRAs and Other Small-Business Retirement Plans
If you’re self-employed or own a small business, you may contribute to a SEP IRA or similar plan such as a SIMPLE IRA or Keogh.
FAFSA/SAI Treatment
Balances Are Not Counted as Assets. Like 401(k)s or traditional IRAs, SEP IRA balances are fully excluded when FAFSA calculates your SAI.
Contributions Lower Income. Contributions for the FAFSA tax year can reduce your adjusted gross income (AGI) and therefore reduce the “parent contribution from income.”
Distributions Are Income. Any withdrawals (other than documented rollovers) count as untaxed income on the FAFSA and can raise your SAI.
CSS Profile Treatment
Most CSS schools also exclude qualified retirement balances, but some may ask for the value of all retirement plans to gauge overall financial strength.
Policies vary, so families applying to private colleges (for example Duke or Davidson) should double-check each school’s instructions.
Planning Tip for NC Business Owners:
Max out SEP IRA contributions before your student’s FAFSA base year to lower AGI and strengthen financial-aid eligibility while keeping retirement funds protected.
2. Home Equity: Primary vs. Investment Properties
FAFSA/SAI: Excludes the equity in your primary residence.
CSS Profile: Counts it, often capped at 2–3× your household income.
Planning Tip for NC Homeowners:
Many private colleges popular with North Carolina families—including Duke, Wake Forest, Davidson, and UNC Chapel Hill—use the CSS Profile.
If you own rental properties or a vacation home on the coast or in the mountains, their equity will count on both FAFSA and CSS—so plan accordingly.
Important Note on Consumer Debt:
The FAFSA does not subtract unsecured consumer debt—such as credit card balances, car loans, or personal lines of credit—from your assets.
Only debts secured by the same asset (for example, a mortgage on a rental property) can offset that asset’s value.
Paying down credit cards before filing the FAFSA will not increase aid eligibility.
3. UGMA/UTMA Custodial Accounts: A Hidden Aid Killer
Custodial accounts are considered the student’s asset, and the FAFSA assesses 20 % of student assets toward college costs.
Planning Tip:
Consider moving UGMA/UTMA funds into a 529 college savings plan, which is treated as a parental asset (only 5.64 % assessed).
Do this well before the FAFSA “base year” to avoid triggering income from the transfer.
4. Life-Insurance Cash Value & Annuities
The cash value of whole-life insurance and qualified annuities is not counted on the FAFSA, but non-qualified annuities are counted on the CSS Profile.
Planning Tip:
If your target colleges include CSS schools, share details of any non-qualified annuities with your advisor so you’re not surprised.
5. Mutual Funds and Brokerage Accounts
Balances in mutual funds, stocks, and bonds are all reportable parental assets.
Planning Tip:
Because only 5.64 % of parental non-retirement assets are counted, these accounts are not as damaging as many parents fear.
Still, it may help to shift a portion into retirement accounts before the base year if you’re under IRS contribution limits.
6. 529 College Savings Plans & Coverdell ESAs
Funds in a 529 plan—whether owned by the parent or dependent student—are treated as parental assets.
Withdrawals used for qualified expenses are not counted as income.
Grandparent-Owned 529 Plans (New 2024-25 FAFSA/SAI Rules)
Balances: Not reported as assets on the FAFSA.
Distributions: Under the new SAI rules, distributions are no longer reported as untaxed student income.
This is a major change from the old formula and greatly increases the usefulness of grandparent-owned 529s for families seeking aid.CSS Profile: Some CSS schools may still ask about non-parent 529s or outside support, so always check each institution’s requirements.
Planning Tip:
Grandparent-owned 529 plans are now one of the most FAFSA-friendly strategies for college savings, provided you confirm each target school’s CSS Profile policy.
Why Timing Matters
The FAFSA now uses prior-prior year income, so your asset positioning two years before your student starts college is critical.
For a Class of 2027 senior, the base year is 2025 tax returns.
North Carolina–Specific Strategy
UNC System Schools: Most campuses are FAFSA-only, but UNC Chapel Hill also requires the CSS Profile, which means home equity and certain other assets will be considered.
Private NC Colleges: Schools such as Duke, Wake Forest, and Davidson all use the CSS Profile; plan for home equity and annuities to be assessed.
Key Takeaways Table
Frequently Asked Questions
Does UNC Chapel Hill require the CSS Profile?
Yes. UNC Chapel Hill requires both the FAFSA and the CSS Profile for institutional aid.
Does consumer debt reduce FAFSA SAI?
No. Credit card balances, car loans, and other unsecured debt do not reduce assets or SAI.
Are SEP IRA balances reported on FAFSA?
No. SEP IRA balances are excluded, but withdrawals count as untaxed income.
Do grandparent-owned 529 plans hurt aid?
Under the 2024-25 FAFSA rules, no. Grandparent-owned 529 balances are not reported as assets, and distributions are no longer counted as student income. CSS Profile policies, however, may differ.
Ready to Protect Your Savings?
Knowing these six rules—including the newest 529 plan updates and small-business retirement tips—can mean tens of thousands in additional aid.
But every family’s situation is unique—especially when you mix in North Carolina’s blend of FAFSA-only publics and CSS private colleges.
Schedule Your Free Call: Book a 25-minute College Admissions Game Plan session to review your assets, projected SAI, and create a custom strategy to keep more of your hard-earned savings.
Disclaimer:
This information is for educational purposes only and not tax or financial advice. Consult your financial advisor or tax professional for personalized guidance.
Confirmed Sources
U.S. Department of Education – FAFSA Simplification Act (2024-25 implementation)
College Board – CSS Profile FAQs and Institutional Methodology (latest updates)
