Crypto on the FAFSA: How Digital Asset Holdings Affect…
By Damilola Esebame
AI summary of the source article
Under the FAFSA, cryptocurrency is treated as a reportable investment asset valued at its fair market value on the submission date. Student-owned digital assets are assessed at 20 percent of their net value, whereas parent-held holdings are assessed at up to 5.64 percent. Following the FAFSA Simplification Act, the asset protection allowance was reduced to zero starting in the 2024-2025 cycle, removing previous buffers for family savings. Additionally, capital gains from cryptocurrency sales automatically transferred via the IRS Direct Data Exchange flow directly into adjusted gross income, where assessment rates reach up to 50 percent for students and 47 percent for parents.
Why it matters
Crypto holdings and realized gains directly increase the Student Aid Index, which can significantly decrease need-based college financial aid for students and families.
Key facts
- Cryptocurrency must be reported as an investment asset on the FAFSA at its fair market value on the day the form is submitted.
- Student-owned cryptocurrency is assessed at 20 percent of net value, while parent-held crypto faces assessment rates up to 5.64 percent.
- The FAFSA Simplification Act eliminated the asset protection allowance to zero dollars starting in the 2024-2025 cycle.