You want to save for your child's college but suspect every dollar you set aside comes straight off the aid offer. Elena — 36, earning $78,000, with a 3-year-old son, Mateo — has the same worry, and the federal formula answers it with numbers: your savings count, but at a fraction of the rate you fear, and whose name is on the account decides how much.
The FAFSA now produces a Student Aid Index
The FAFSA (Free Application for Federal Student Aid) feeds a federal formula that produces your Student Aid Index (SAI). The SAI replaced the old Expected Family Contribution starting with the 2024–25 form. It can be negative — as low as −1,500 — and a negative number tells the school you have higher need. Your school subtracts the SAI from its cost of attendance to find your financial need, then sizes need-based aid to that gap. The SAI is an index for the school, not a bill you must pay. How college gets paid for covers the whole stack of sources; this page is about how saved money enters the index.
The formula adds four pieces: the parents' contribution from income, the parents' contribution from assets, the student's contribution from income and the student's contribution from assets. Savings show up in the two asset pieces, and those two pieces run at very different rates.
Parent assets vs student assets: 5.64% vs 20%
This is the mechanic almost nobody explains plainly. From the 2026–27 Federal Student Aid Handbook:
| Whose name the money is in | How the formula counts it |
|---|---|
| Parents' assets | Net worth minus an asset protection allowance, × 12%; that amount is added to the parents' available income and assessed at 22% to 47% — at most 5.64% of each dollar |
| Student's assets | Net worth × 20%, with no allowance |
Per $1,000 saved, that works out to:
| $1,000 saved in… | Added to the SAI |
|---|---|
| Parent's name, family assessed at the lowest 22% rate | $1,000 × 12% × 22% = $26.40 |
| Parent's name, family assessed at the top 47% rate | $1,000 × 12% × 47% = $56.40 |
| Student's name | $1,000 × 20% = $200.00 |
A dollar in the student's name costs 3.5 to 7.6 times more aid eligibility than the same dollar in a parent's name — and that is before the parents' asset protection allowance, which shelters the first slice of parent assets entirely.
Which accounts count, and as whose
| Account | Reported on the FAFSA as | Rate |
|---|---|---|
| 529 a parent owns for the student | Parent asset | up to 5.64% |
| 529 the dependent student owns | Parent asset — the form keys on whom the account is designated for | up to 5.64% |
| 529 a parent owns for a sibling | Not reported since the 2024–25 FAFSA | 0% |
| 529 a grandparent (or anyone else) owns | Not reported; the student is the beneficiary, not the owner | 0% |
| UGMA/UTMA custodial account | Student asset — the minor legally owns it | 20% |
| Student's own checking and savings | Student asset | 20% |
| Parents' checking, savings and brokerage accounts | Parent asset | up to 5.64% |
| 401(k), IRA, pension and annuity balances | Not reported | 0% |
| The home you live in | Not reported | 0% |
Two rows deserve a closer look. A custodial account belongs to the child, and the formula sees that ownership: it counts at 20%, while a parent-owned 529 holding the same balance counts at 5.64% at most. And a grandparent-owned 529 is now invisible: it was never reported as an asset, and since the 2024–25 FAFSA its withdrawals are no longer reported as the student's income either, because the old "money received or paid on your behalf" question was removed.
Income matters more than assets
Parent income is the biggest input in the formula; assets are the secondary one, and parent assets get both the protection allowance and the 12% conversion. On the student side, income above an allowance set each year is assessed at 50% — so a summer-job paycheck above that allowance counts 2.5 times harder than money sitting in the student's savings account. A parent-owned college fund rarely moves an aid offer much; a jump in parent income moves it far more.
| Input | Rate in the SAI formula |
|---|---|
| Parents' available income | Assessed at 22% to 47% |
| Parents' assets | 12% of net worth above the allowance, then assessed with income |
| Student's income above the allowance | 50% |
| Student's assets | 20% |
The retirement exception
Balances in your 401(k), IRA, pension or annuity are not reported on the FAFSA at all, and neither is the home you live in. That's why retirement saving and college saving don't compete for the same counted pile: a $50,000 retirement balance adds $0 to the SAI, while $50,000 in a parent-owned 529 adds at most $2,820 ($50,000 × 12% × 47%). The college-plan lesson builds on exactly this.