Some colleges and universities require that you complete the CSS Profile on top of or instead of the FAFSAⓇ. Though much of the information you will need to provide will overlap, the CSS Profile is more comprehensive than the FAFSA and requires extra information like the financial information of noncustodial parents and family retirement plans.
Retirement Plans and the FAFSA
In most cases, do not report the value of your retirement plans on the FAFSA application. Retirement assets that should not be reported as assets are 401k plans, pension funds, annuities, non-education IRAs, and Keogh plans. What you do need to report are any voluntary contributions into or withdrawals from those plans over the year requested on the FAFSA. This is reported as untaxed income in section #94 of the FAFSA.
For more detailed information about reporting retirement assets on the FAFSA, read our article about retirement savings and the FAFSA.
Retirement Plans and the CSS Profile
Unlike on the FAFSA application, the value of retirement plans are included on the CSS Profile. According to the Profile, student and parent retirement plans (IRA, Keogh, 401k, 403b, etc.) are reported as assets for the respective owners. A student-owned retirement plan will be reported in the Student Assets section, SA-105. A parent-owned retirement plan can be reported in either Parent Data section PD-175 or PD-270.
Plans that must be reported are:
If you have a retirement plan not included in this list, confirm with College Board if you should record these assets in this section or elsewhere.
Effect of Retirement Plans on EFC
The information provided on the CSS Profile will be reviewed by all the colleges to which you apply. It is at each college’s discretion to decide your aid for that particular school based on the information provided.
Some schools might glance at the value of familial retirement funds, but not consider these numbers when calculating a student’s need-based aid. Others might choose to include these values in their financial aid calculations. The CSS Profile provides detailed financial information to colleges, but it is up to those colleges to decide how to handle that information.
Borrowing from Your 401k
Some parents think about taking loans out of their 401k plans instead of having their kids take out loans. Proceed with caution: By removing money from your 401k, you’re not only limiting the potential growth of the plan, but you are also putting yourself at risk for paying significant extra costs. For one, the money put into your 401k was untaxed and the money you will have to pay it back with will be in post-tax dollars. For another, if you are under 59½ years of age and withdraw funds from your 401k for this purpose, you will be responsible for paying a withdrawal penalty of 10% on the loan amount.
For more information, read Edmit’s article.