The 2027-28 FAFSA® is now open through the Department of Education’s website. If your child will be in college next fall, or you’ll be paying for college within the next few years, now is the time to plan. The financial aid rules have changed a lot recently. The FAFSA was overhauled starting in 2024-25, and the One Big Beautiful Bill Act (OBBBA) added more changes for 2026-27 and beyond. Some strategies that worked a few years ago no longer matter. A few new ones have appeared. Here is what families need to know now.
The Basics: How Aid Eligibility Is Calculated
Your family’s eligibility for need-based aid is measured by the Student Aid Index (SAI), which replaced the old Expected Family Contribution. Two things drive it:
- Current assets: These are the balances in your bank, brokerage, and other reportable accounts on the day you file. Timing matters, because the FAFSA takes a snapshot rather than an average.
- Prior-prior year income: The FAFSA looks at the tax return from two years before the school year. For the 2027-28 school year, that’s your 2025 tax return. Your tax information now transfers directly from the IRS, so every “contributor” (student, parents, spouse) must provide consent and have their own StudentAid.gov account.
Need-based aid isn’t only for low-income families. Many private colleges offer need-based aid well into the middle and upper-middle class to attract strong students.
What the FAFSA Doesn’t Count
The FAFSA ignores several categories of assets:
- Your primary residence and the mortgage on it
- Retirement accounts (401(k), 403(b), IRAs, pensions)
- Personal property: cars, furniture, electronics, and household goods
- 529 plans owned by grandparents or anyone other than a parent or the student
- 529 plans you own for your other children
- New for 2026: The net worth of a family-owned business with 100 or fewer full-time employees, a family farm you live on, and a family commercial fishing business
Ways to Lower Reportable Assets
Because the FAFSA counts some assets and ignores others, moving value from “countable” to “non-countable” before you file can help. Always weigh these moves against your overall financial plan, and make them before the day you submit.
- Pay down unsecured debt: Paying off credit cards or personal loans lowers your countable cash.
- Make extra mortgage or HELOC payments. This shifts cash into home equity, which the FAFSA ignores.
- Delay new borrowing: Wait to open a HELOC or take a personal loan until after you file, so the loan proceeds don’t count as cash.
- Prepay real, near-term expenses: Buy the laptop, dorm supplies, or other items you’ll need anyway.
- Report only what’s required: Don’t list retirement accounts, home equity, personal property, or a qualifying small business or family farm on the FAFSA. Over-reporting is one of the most common and costly mistakes.
Ways to Lower Reportable Income
For families with younger high school students, the choices you make in 2026 and 2027 will shape aid for the 2028-29 and 2029-30 school years.
- Manage realized capital gains: Harvest losses and time gains thoughtfully in aid-sensitive years.
- Review your investment approach: In taxable accounts, favor tax-efficient funds with low capital gain distributions.
- Time stock option exercises: When possible, avoid exercising non-qualified stock options in aid-sensitive years.
- Business owners: the timing of deductible expenses and your accounting method can affect reported income.
Grandparents and Other Helpers: Good News
Under the old FAFSA, help from grandparents, including 529 distributions, counted as student income and could reduce aid. That’s no longer true. Today, a grandparent-owned 529 plan isn’t reported on the FAFSA, and neither are its distributions or other cash support from grandparents, aunts, uncles, or friends.
That makes grandparent-owned 529 plans one of the most aid-friendly ways to save. One caution: gifts given to parents become parent assets. If grandparents want to help, it’s usually better for them to pay directly or hold the 529 themselves.
New Rules to Know in 2026-27 and Beyond
- Pell Grant cutoff: Students with an SAI at or above twice the maximum Pell Grant are no longer eligible. For 2026-27, that line is $14,790.
- Parent PLUS limits: New Parent PLUS loans are capped at $20,000 per year and $65,000 in total per dependent student. Parents must plan to repay on the standard plan.
- Sibling discount FAFSA eliminated: Having two children in college at once no longer lowers each child’s SAI.
- Divorced or separated parents: The parent who provides more financial support files as the FAFSA parent, which may not be the parent the student lives with. Child support received is reported as an asset.
How We Can Help
College planning is one of many services built into the financial planning process at Hurlow Wealth Management Group. For over two decades, our team of fee-only fiduciaries in Bloomington and Indianapolis, Indiana, has helped families in 26 states navigate education funding and other planning decisions. Our clients tell us that working together gives them clarity, confidence, and peace of mind that they can provide for their family.
Schedule an introductory call or call 866-333-4726 to see if our services are right for you.
