Every year, millions of families fill out the Free Application for Federal Student Aid (FAFSA), hoping to secure financial support for college.
Yet despite its importance, the FAFSA remains one of the most misunderstood and mismanaged parts of the college planning process. One small mistake can lead to thousands of dollars lost in aid.
At College Benefits Research Group (CBRG), we’ve helped hundreds of families navigate the FAFSA with precision and confidence. Time and again, we see the same error costing families dearly. So what is the most common mistake?
Let’s explore that, along with other critical FAFSA pitfalls—and how to avoid them.
Understanding the Impact of FAFSA on Financial Aid
The FAFSA is the gateway to virtually all federal financial aid—including Pell Grants, work-study programs, and federal student loans. But it also plays a critical role in determining state and institutional aid, and even some merit-based scholarships.
Far too many families assume they won’t qualify for aid and skip the FAFSA entirely. That’s a costly mistake. Many colleges require the FAFSA for all forms of aid, not just need-based support.
Additionally, even minor errors on the FAFSA—such as listing assets incorrectly or missing deadlines—can reduce your eligibility. This is why accuracy, timing, and a clear understanding of what the FAFSA asks for are essential.
CBRG emphasizes FAFSA planning as a core part of our college financial strategy. We help families understand how their financial profile affects aid and how to optimize it before filing.
The #1 Most Common FAFSA Mistake: Reporting Parent Assets and Income Incorrectly
The single most common and costly mistake on the FAFSA is incorrectly reporting parent assets and income. Why? Because the FAFSA’s definitions don’t always match what families see on their tax returns.
Misreporting Retirement Accounts as FAFSA Assets
One of the most frequent asset-related errors families make is including retirement accounts as reportable assets. The FAFSA specifically excludes 401(k)s, IRAs, pensions, and other retirement savings from consideration.
However, families often mistakenly report these accounts, believing that because they’re listed on tax documents, they must be included. This mistake can artificially inflate a family’s Expected Family Contribution (EFC), significantly reducing aid eligibility.
CBRG advises families to review account types carefully and distinguish retirement accounts from investment accounts that must be reported, such as brokerage accounts or CDs.
Incorrectly Valuing Family Businesses or Farms
Another common misstep is misreporting the value of small businesses or family farms. The FAFSA excludes small businesses owned and operated by the family if they have fewer than 100 full-time employees.
Yet many families mistakenly report these assets, assuming that any business ownership must be disclosed.
Incorrect valuation or unnecessary disclosure of business equity can skew financial aid calculations. At CBRG, we educate families on what qualifies for exclusion and help document business size and ownership accurately to prevent this error.
Confusing Parent vs. Student Asset Fields
The FAFSA treats student assets much more harshly than parent assets—assessing them at up to 20% for aid calculation purposes, compared to a maximum of 5.64% for parent assets.
Unfortunately, many families mistakenly report parent-owned 529 plans or custodial accounts under the student’s name, inadvertently penalizing their aid eligibility.
CBRG clarifies how different accounts should be categorized based on ownership and control. We ensure that 529 plans and UGMA/UTMA accounts are reported properly to reflect the lowest impact on the aid formula.
Including Primary Home Equity in FAFSA Calculations
The FAFSA does not consider the equity in your primary residence when determining your financial aid eligibility. Despite this, many families mistakenly include home value and mortgage balance in their calculations, which can greatly increase their perceived ability to pay.
This mistake is often the result of confusing FAFSA with the CSS Profile, which does ask for home equity.
CBRG makes sure families understand which form they’re completing and which types of property and equity need to be reported. We help avoid this mix-up, especially for families applying to both FAFSA and CSS Profile schools.
These errors can drastically increase the Expected Family Contribution (EFC), resulting in reduced aid.
One CBRG parent shared in a video testimonial that after correcting asset reporting with our help, their student qualified for significantly more aid.
They had mistakenly reported their entire retirement account balance and were initially offered almost no need-based support.
Our team ensures families understand the FAFSA’s language and interpret their tax and financial documents correctly—before submission.
Other High-Impact FAFSA Mistakes Families Frequently Make
While asset reporting is the most damaging mistake, many other common errors can affect aid eligibility:
Missing the FAFSA Deadline
FAFSA deadlines vary by federal, state, and institutional levels—but they all matter. Many states and colleges award aid on a first-come, first-served basis, which means applying late could leave you with significantly less financial support.
Missing these deadlines is one of the most preventable but damaging mistakes families can make.
CBRG keeps families on track with deadline reminders, strategic planning calendars, and early filing strategies to ensure every opportunity for aid is available.
Using the Wrong Tax Year
The FAFSA uses income information from two years prior—known as the “prior-prior year.” For instance, the 2025–2026 FAFSA asks for financial details from 2023.
Families often confuse this, entering more recent figures instead. This discrepancy can cause processing delays or inaccurate aid calculations.
CBRG ensures families understand which documents are required and helps them prepare the correct tax forms in advance to avoid errors.
Leaving Fields Blank
Leaving blanks on the FAFSA can trigger processing delays or misinterpretation. For example, leaving an asset field blank may be read as a zero or as incomplete, which can alter your aid eligibility. Some fields must contain a zero if the value is truly none.
We guide families through each section to ensure that every required field is addressed clearly and correctly, avoiding assumptions that could cost them money.
Forgetting to Sign the FAFSA
A simple oversight like not signing the FAFSA can invalidate the entire application. Both the student and one parent (for dependent students) must sign using their FSA IDs. Without these electronic signatures, the form won’t be processed.
CBRG walks each family through the submission process, including signature confirmation and post-submission verification steps.
Not Listing All Colleges
The FAFSA allows students to list up to 20 colleges, and each school must be included to receive your financial aid information. Some families forget to list certain schools, particularly if they add them later in the admissions process. This can delay aid packages or cause missed deadlines for specific colleges.
We work with students to develop and manage a comprehensive college list, ensuring every institution receives their financial information on time.
At CBRG, we walk families through a detailed FAFSA checklist and timeline, minimizing the chance of these costly errors.
Key Differences Between FAFSA and CSS Profile
Some private colleges require the CSS Profile in addition to the FAFSA. These forms are not interchangeable—they ask for different financial information and use different methodologies to assess need.
Key distinctions:
- CSS Profile includes home equity, non-custodial parent income, and more detailed asset info.
- FAFSA is standardized; CSS Profile varies by institution.
- CSS Profile often required for institutional aid at elite private colleges.
CBRG helps families complete both forms correctly and consistently. Misalignment between them can raise red flags and affect aid awards. We also help families prepare documentation in advance and track submission dates for each school.
What Happens If You Make a Mistake on the FAFSA?
If you realize you’ve made a mistake after submitting your FAFSA, don’t panic. Most errors can be corrected easily online by logging back into the FAFSA portal.
Correctable mistakes include:
- Incorrect tax information
- Misreported assets
- Changing the list of schools
- Updating dependency status or number of family members
For more complex issues or significant changes in financial circumstances—such as job loss or medical expenses—you can submit a formal appeal to the college’s financial aid office.
CBRG assists families not only with filing but also with post-submission reviews and appeals. We’ve helped numerous clients successfully increase their aid by correcting errors or submitting new documentation after unexpected financial shifts.
Why Getting Professional Help Matters
The FAFSA is deceptively complex. While it appears simple on the surface, the implications of each answer can be significant—and mistakes are costly.
Working with a professional like CBRG ensures:
- Accurate asset and income reporting
- Awareness of deadlines and strategies
- Coordination with CSS Profile and institutional forms
- Guidance on appeals, verification, and award review
One client shared in their testimonial that before working with CBRG, they didn’t realize their 529 plan for a younger sibling needed to be reported under the parent’s name. Once corrected, they received nearly $15,000 more in aid across four years.
CBRG also stays up to date with FAFSA changes—including those related to the FAFSA Simplification Act. Even with streamlined questions, the risk of misinterpretation remains high, making professional guidance more important than ever.
Frequently Asked Questions About the FAFSA
Yes. You must submit a new FAFSA for each academic year to be considered for aid.
You may miss out on state and institutional aid, which is often awarded on a first-come, first-served basis.
No. Retirement accounts should not be listed as assets.
Yes. If the parent is the account owner, all 529 plans should be listed under parent assets.
Only the custodial parent’s information is required. If remarried, include the stepparent’s information as well.
Possibly. The new formula eliminates the number of students in college from the aid calculation, which may reduce aid for some families.
Submit a financial aid appeal with documentation. CBRG helps families write and support these appeals effectively.
Avoid the FAFSA Mistakes That Cost Families Thousands
Filing the FAFSA correctly and on time is critical to maximizing your student’s financial aid. CBRG’s expert team helps families eliminate errors, uncover hidden aid opportunities, and navigate every step of the process.
Schedule a consultation today and get peace of mind knowing your FAFSA is in expert hands.