<p>I already completed both a awhile ago, but I was wondering if my father's "tax-deferred retirement, pension, annuity, savings plan, 401(k), SEP, etc", basically the money meant for his retirement, is that included in the EFC that FAFSA and the CSS Profile compute? </p>
<p>Do they expect the parent to take money out of those funds [401(k) especially] to pay for the cost of attendance?</p>
<p>Both FAFSA and CSS Profile ask for the current year’s contributions to 401K but only CSS Profile requests the total value of those accounts. I don’t know how the colleges interpret the information but for FAFSA, the contributions are added to the parent’s income so it has a bearing on the EFC that is calculated.</p>
<p>Also, CSS profile does not compute a EFC, only FAFSA does. CSS Profile is just information the school may use to determine the financial aid they may award.</p>
<p>One other note, some schools only request CSS Profile the first year while others may require it all four years. My son’s private requests it every year but my daughter’s public only requires it for first year students.</p>
<p>Contributions made to PRETAX retirement accounts are added back as income on the FAFSA. The actual balances in those accounts are not reported at all on the FAFSA.</p>
<p>The Profile also adds back pretax contributions. Profile asks for the balances in those accounts but it doesn’t seem likely that they are actually USED (using a net price calculator, these are not included I don’t believe). The thought is that colleges want to see if families are putting excessive contributions into retirement instead of into college savings. For example…if your family AGI comes out in the very low income range, say full Pell eligible, but you have a million dollars in your retirement accounts…someone might wonder how that happened…and why.</p>
<p>There is no thought that these accounts actually are tapped for college costs purposes when computing the family contribution either using the federal methodology (FAFSA) or the institutional (Profile).</p>
<p>Oh…and contributions to retirement accounts post tax (e.g. Roth IRA where you already pay taxes) are not added back in as they are ALREADY included in your AGI.</p>