The FAFSA Stopped Counting Your Family Business. On a $250,000 Shop, That's $14,100.

If your family owns a small business, a farm you live on, or a commercial fishing operation, the federal aid formula stopped counting what it’s worth. Not the profit. The equity. That number came off the FAFSA with the 2026-27 award year, and for a lot of families it was the single biggest line working against them.

Federal Student Aid spelled it out in announcement APP-25-23. Beginning with 2026-27, the net worth of a family-owned business with 100 or fewer full-time employees, the net worth of “farms on which the family resides,” and the net worth of a family-owned commercial fishing business “should not be reported as assets on the FAFSA form.”

The instruction is to leave it off the form. Not to report it and hope the formula is kind.

The rule has flipped twice in three years

Before 2024, small business and farm equity was excluded. Then the FAFSA Simplification Act took the exclusion away. For the 2024-25 and 2025-26 years, as Finaid describes the rule, applicants had to “report the net worth of all businesses, regardless of the size of the business.” A two-person landscaping outfit got measured the same way a factory does.

Two aid years later, the One Big Beautiful Bill Act put the exclusion back, effective July 1, 2026.

So two full classes of students had their aid calculated under a rule that has since been reversed. Nobody is going back to redo those years. If you filed in 2024-25 or 2025-26 and the shop equity is what sank your number, that money is gone.

What it’s worth

Wealth Management worked an example in July: a $250,000 family restaurant pushed the family’s Student Aid Index up by $14,100 under the old treatment. The SAI is the number a college subtracts from its cost of attendance to decide what you need. Move it down $14,100 and a family can go from “no demonstrated need” to real need at an expensive school.

Here’s the catch. The exclusion covers equity, not cash flow. Whatever the business paid you still lands on the FAFSA as income, through the Schedule C or the K-1, and the formula hits income harder than it hits assets. Owning the building helps you now. Making money in it still doesn’t.

Verdict: good rule, brutal timing for anyone who filed during the two years it was gone.

Do this

The 2027-28 FAFSA is on track to open by October 1. When you file, leave the business and farm net worth off. That is not an aggressive read of the rules, it’s the Department’s own instruction.

Then pull up what you actually filed for 2026-27. If you reported the business or the farm out of habit, or off a worksheet written two years ago, take it to your school’s aid office and correct it. A wrong asset figure carries into every award built on top of it.

If your SAI drops, the practical result is that you borrow less. Run that difference through our loan calculator before you sign for anything, and check the education hub for how grants stack against loans this year.

The fine print

Family-owned means the family holds more than 50 percent of the voting rights. The size test is 100 or fewer full-time or full-time-equivalent workers. The farm exclusion is written for a farm you live on, so investment farmland is a separate question. Ask the aid office instead of guessing, and get the answer in writing.

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