FAFSA change for small business owners

Add small business owners to the group of people impacted by the recent FAFSA changes.

Previously, the value of any privately held business, including assets, with less than 100 employees did not need to be reported on the FAFSA as part of its small business exclusion.

However, that exclusion has gone away as part of the many significant changes on the revised form.

On the revised FAFSA, the net worth of any small business or family farm is reported as an asset on the FAFSA. Depending on the value, this could significantly reduce the ability of certain families to qualify for need-based aid.

The net worth is calculated by subtracting business or farm debt from the current fair market value of the business or farm (including the value of land, buildings, inventory, equipment, machinery and livestock). To be considered a business or farm debt, the debt must be secured by the business or farm. If the debt uses something else as collateral, it does not offset the value of the business or farm.

There also had been an income-based exception to these changes., but that has also gone away.

*a previous version of this article outlined rules for small business owners prior to the 2023-24 school year