|Are there any assets that are not counted for financial aid purposes?|
Yes, assuming you are talking about federal financial aid. Under the federal government's financial aid formula, four main types of assets are excluded from consideration when determining your child's financial need:
All retirement accounts (e.g., IRAs, 401(k)s, 403(b)s)
Home equity in a primary residence
Cash value life insurance
These assets are known as nonassessable assets. All other assets that belong to you and your child are known as assessable assets and include items like checking and savings accounts, stocks, bonds, mutual funds, 529 plans, Coverdell education savings accounts, custodial accounts, trusts, and investment property. The more assessable assets you have, the more money you will be expected to contribute to college costs.
For example, let's say Mr. and Mrs. Green have a Roth IRA worth $50,000, home equity of $75,000, cash value life insurance of $100,000, and a mutual fund worth $25,000. Under the federal financial aid formula, the Greens are considered to have only $25,000 worth of assets (i.e., the mutual fund).
By contrast, Mr. and Mrs. White have stock holdings worth $30,000, a 529 plan worth $60,000, a Coverdell account worth $10,000, and home equity of $200,000. Under the federal financial aid formula, the Whites are deemed to have $100,000 worth of assets (i.e., stocks, 529 plan, and Coverdell account).
Individual colleges may use a formula that differs from the one used by the federal government to determine financial need. Specifically, the formula may take into account the value of your retirement accounts and/or home equity, and may even expect you to borrow against these assets.