Financial Aid

Answers to Your Financial Aid Questions

Learn what an asset is, where to report merit-based aid on the FAFSA, and the difference between a parent and student loan.
Couple working on laptop to get answers to financial aid questions

Each year, MEFA receives numerous questions about financial aid in general and the Free Application for Federal Student Aid (FAFSA®) in particular. We compile these questions to provide guidance to families throughout the fiancial aid process. Perhaps you also have one of the questions below.

What's an asset?

The FAFSA requires that parents and students report the value of their assets. On the FAFSA, an asset is defined as cash, savings and checking accounts, trust funds, Certificate of Deposits (CD's), stocks, bonds, real estate other than the primary residence, and any other investments, as of the day the family is completing the FAFSA.

Not reported as an asset is the primary residence of the family or the value of any official retirement accounts, such as 401(k)s, 403(b)s, or IRAs.

Remember that in the situation of divorced or separated parents, report only the assets of the parent listed on the FAFSA and that parent's current spouse.

On the FAFSA, where do we report merit-based financial aid received by the student in the previous year?

Merit-based financial aid does not get reported directly on the FAFSA. Instead, students are required to report any financial aid (merit or need-based) that exceeds the cost of tuition, fees, and books on their tax return as income in the year it was received, which is then reported within total income on the FAFSA. However, the FAFSA distinguishes this portion of financial aid reported as taxable income, and removes it before calculating a student's eligibility for financial aid.

How does unemployment affect financial aid?

If a parent is unemployed when filing the FAFSA, the parent will indicate that he or she is a dislocated worker, which may exclude the parent from needing to report assets on the FAFSA. Any unemployment benefits received will be included in the parent's Adjusted Gross Income on the tax return and thereby reported on the FAFSA.

If a parent becomes unemployed after filing the FAFSA, the student should contact the financial aid office at each college as soon as possible to determine if the student is eligible for an adjustment in the financial aid as a result of the job loss.

What effect does a business have on the SAI?

Any business income that appears on the parents' tax return will be included in the Adjusted Gross Income (AGI) and be reported on the FAFSA. As well, the family must report the net worth of the business on the FAFSA. The net worth is defined as the value of the business today, minus any debts related to that business. 

What's the difference between a parent and a student loan?

Student loans can come from the federal government, the state government, or private lenders. Federal government student loans, called Federal Direct Student Loans, are offered by the school as part of the financial aid package and are in the student's name only. There is no credit check for these loans. The student will be notified by the college of the loan amount and type, and how to access these funds prior to the start of each academic year. Generally, the maximum a student is eligible to receive in a Direct Loan is $5,500 freshman year, $6,500 sophomore year, and $7,500 in both junior and senior years. 

Some state governments offer student loan programs. Massachusetts provides the No Interest Loan (NIL) program for students with exceptional financial need. The college financial aid office determines which students receive the NIL, which has a maximum offer amount of $4,000.

A student may apply for a loan through a private lender, such as a bank, credit union, or entity like MEFA, but will likely need a co-borrower with an established credit history, such as a parent or other family member, to co-borrow the loan.

On a parent loan (such as a Federal PLUS Loan), the parent is the sole borrower. These loans are credit-based. The Federal PLUS Loan also requires that the family file a FAFSA.

Families interested in a private student loan or a parent loan should wait to apply until the student has received his or her financial aid offer. For both of these loans, the parent and/or student can generally borrow up to the cost of attendance minus any financial aid received.

Do you have additional questions about financial aid? Review our dedicated financial aid page. And if you'd like to ask your question to us directly, call us at (800) 449-MEFA (6332) or email us at

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