Filing the FAFSA makes families look at their tax return in a new way. Questions come up about AGI, retirement savings, assets, and which year’s income counts. Here is how the Student Aid Index works.
What the Student Aid Index means
The Free Application for Federal Student Aid produces a Student Aid Index, or SAI. Schools use it as part of determining eligibility for aid. It is an index, not your bill and not a promise of a particular award. Your school’s cost, available aid, and other eligibility rules matter too.
Which tax return does FAFSA use?
The income year is generally two years before the start of the academic year. The 2026–27 FAFSA uses 2024 tax information; the 2027–28 FAFSA uses 2025. Assets, when required, are reported as of the day you complete the form. That difference in timing is a big reason to plan ahead.
AGI matters, but it is not the whole calculation. The formula includes allowances and other tax information. Deductible IRA contributions and certain self-employed retirement contributions are added back. Ordinary employee pretax 401(k) salary deferrals are treated differently. A lower tax bill and a better financial-aid result are two different things.
What about savings, retirement, and the house?
The home you live in and retirement account balances generally are not reported as FAFSA investments. Cash and other investments may be reportable. Education savings accounts have specific ownership and beneficiary rules, so do not assume every account goes in the same box. Some applicants are exempt from asset reporting.
For a dependent student, the formula treats parent and student resources differently. Household size matters. Having another child in college no longer automatically divides the federal parent contribution as it did under the old EFC formula. Schools using the CSS Profile may ask different questions and use different rules.
What if your tax return no longer reflects your life?
A layoff, reduced income, or other significant change may justify a conversation with the school’s financial-aid office. Ask about a special-circumstances review. You still complete the FAFSA using the required information; the school decides whether an adjustment is appropriate.
Let’s look at the whole picture
Many families do not realize how early the tax years for college aid begin. If a child starts college in fall 2027, the 2025 return is the one used by the 2027–28 FAFSA. Call (781) 471-4310 to discuss the tax questions behind your college plan. The school determines the aid offer.
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Current guidance: Federal Student Aid’s FAFSA guide and understanding your FAFSA Submission Summary.