If your family owns a small business, a farm you live on, or a commercial fishing operation, the 2026-27 FAFSA just got a little fairer. Under the One Big Beautiful Bill Act (OBBBA), a rule that quietly hurt thousands of self-employed and farm families on the past two FAFSAs is being reversed. Starting with the 2026-27 award year, the value of your family-owned business or farm no longer counts as a reportable asset on the FAFSA, if you meet a few conditions. For many families, that change alone could drop their Student Aid Index (SAI) by thousands of dollars and free up more grant aid.
Below is what actually changed, who qualifies, and what to do if your business assets pushed up your SAI on a recent FAFSA. The change is real, but the details matter.
What Actually Changed on the FAFSA
For more than 30 years, the FAFSA excluded the net worth of family-owned small businesses and family farms from the federal aid formula. Then the FAFSA Simplification Act, which took full effect for the 2024-25 FAFSA, removed that exclusion. From 2024-25 through 2025-26, families had to report the value of small businesses, farms, and similar assets, which inflated the SAI and reduced eligibility for Pell Grants, subsidized loans, and many state and school grants.
OBBBA, signed in 2025, put the exclusion back, starting with the 2026-27 FAFSA. The 2026-27 FAFSA opened in October 2025 and is the one most families are filling out right now.
Here is what is excluded for 2026-27 and beyond:
- Family-owned small businesses with 100 or fewer full-time (or full-time equivalent) employees
- Family farms on which the family resides
- Commercial fishing businesses owned and controlled by the family, including related equipment
You no longer report the net worth of these assets on the FAFSA. That means the value of your bakery, your dental practice, your auto shop, your dairy farm, or your fishing vessel does not raise your SAI.
Who Qualifies for the Exclusion
The new rule does not cover every small business. Your business has to pass three tests.
1. Family Ownership and Control
The business must be owned and controlled by your family. That means your family holds more than 50% of the voting rights. A "family" here generally includes the student, parents, spouses, siblings, and other close relatives whose ownership combines to clear that majority threshold.
2. Size Limit (100 or Fewer Full-Time Employees)
The business has to have 100 or fewer full-time employees, measured in full-time equivalents. Two half-time workers count as one full-time equivalent. If your headcount sits right at the boundary, count carefully. A business with 101 full-time employees is over the line.
3. Type of Business
The rule covers most small businesses, family farms, and commercial fishing operations. For farms, there is one extra condition: the family must live on the farm. A farm held purely as an investment property, where no family member resides, is not covered.
Real estate held only as an investment (a rental house, a vacation home, raw land you do not live on) is still a reportable asset on the FAFSA. So is money sitting in a regular brokerage or savings account, even if some of it is earmarked for the business. The exclusion is about the operating business itself, not about everything connected to it.
How Much Could This Save Your Family
The FAFSA formula does not count every dollar of assets equally. Parent assets above an asset protection allowance are assessed at a maximum of 5.64%. That means a $200,000 net business value would have added roughly $11,280 to your parent contribution under the old rule. Take that number off your asset total, and your SAI drops by that same amount.
A few examples of what that could mean for families:
- A family running a $400,000 dental practice would have seen roughly $22,500 added to their SAI under 2024-25 and 2025-26 rules. For 2026-27, that goes away.
- A farming family living on a farm valued at $750,000 in land and equipment would have seen about $42,000 added to their SAI. That entire amount is now excluded.
- A fishing family with a $300,000 vessel and gear would have seen close to $17,000 added to their SAI. Now, none of it.
A lower SAI does not just affect federal aid. State grants, institutional need-based aid at colleges, and many private scholarships also use the SAI (or a closely related number) to decide who gets what. A drop of even a few thousand dollars in SAI can be the difference between a $0 Pell Grant and a partial Pell Grant, or between a smaller institutional grant and a larger one.
If you want to dig into how the SAI is calculated, see our complete SAI guide for 2026-27.
Who Benefits Most (and Who Does Not)
The families who gain the most are the ones who got hit hardest the last two years:
- Self-employed parents who own a meaningful share of a small business
- Multi-generational family farms where the family lives on the property
- Family-run commercial fishing operations
- Small medical, dental, legal, and consulting practices
- Family-owned restaurants, shops, and trades businesses
If your family rents out a duplex, owns stock, or has a sizable 529 or brokerage balance, those assets are still reportable. Retirement accounts (401(k), 403(b), IRA, Roth IRA) have always been excluded and continue to be excluded. Your primary home is also excluded on the FAFSA, though some schools' CSS Profile forms do count home equity.
The change does not lower anyone's SAI on its own. It just stops counting certain assets. If your family does not own a qualifying business or farm, this rule changes nothing for you.
What to Do When You File the 2026-27 FAFSA
If you already submitted the 2026-27 FAFSA, you may have reported your business or farm value out of habit or because an older version of the form asked for it. The Department of Education updated the FAFSA itself, so qualifying business and farm net worth is not requested for 2026-27. If your form was filed correctly, you would not have entered those values.
A few practical steps to make sure you get the benefit:
- Re-check your 2026-27 FAFSA. Log in at studentaid.gov and look at the asset section of your submitted FAFSA. If you reported the value of a qualifying family business or farm, you can correct that. Our walkthrough on how to correct or update your FAFSA covers the steps.
- Confirm your business qualifies. Count full-time equivalent employees, confirm family ownership of more than 50% of voting rights, and (for farms) confirm your family lives on the property.
- Keep records, just in case. If your school selects your FAFSA for verification, the financial aid office may ask follow-up questions about your business or farm. Be ready to show employee counts, ownership structure, and (for farms) proof of residence.
- Watch your SAI number, not just the FAFSA confirmation. The number that matters is the Student Aid Index reported back to you and your schools. Compare it to what you saw on a previous FAFSA if you filed one.
If you have not filed the 2026-27 FAFSA yet, our step-by-step guide on how to fill out the FAFSA walks you through the asset section and what to include.
What If Past FAFSAs Hurt Your Aid
This change only applies to the 2026-27 FAFSA and going forward. If your 2024-25 or 2025-26 financial aid package was built around an SAI that included your family business or farm, that prior aid year is not automatically recalculated.
You do still have some options:
- Ask your school's financial aid office about a professional judgment review. If you are a current student whose family circumstances (business income, farm conditions, hours worked) have changed in a meaningful way, financial aid administrators have discretion to adjust your aid. The rule change itself is not a reason for an appeal, but a real change in your family's situation can be.
- Compare what your SAI would have been. Some families find it useful to see the difference side by side. Even if you cannot recover prior aid, knowing the new baseline helps you plan future borrowing and payments.
- Use the new lower SAI to negotiate. If you are choosing between schools or appealing a 2026-27 offer, your improved SAI may strengthen your case. Our guide on how to appeal your financial aid package walks through how to make the ask.
How This Fits With Other 2026-27 Changes
The business and farm exclusion is one small piece of a much bigger OBBBA package. OBBBA also changes Parent PLUS loan limits, ends Grad PLUS loans for new borrowers, ends the SAVE plan, and replaces it with the Repayment Assistance Plan (RAP) starting July 1, 2026. Most of those changes raise costs or shrink borrowing options. The asset exclusion is one of the few that actually helps families.
For the full picture, see our overview of the final OBBBA rules and what families need to know before July 1. And if your school's financial aid office has been slow to send a 2026-27 offer, our guide on estimated aid offers this summer explains why and what to do.
A Few Things to Watch For
The rule is simple on paper. In practice, it can trip families up. A few things to double-check:
- Mixed-use property. A farm where the family lives but also rents out cabins, a building where the family runs a shop downstairs but rents out apartments upstairs. The exclusion applies to the operating business itself, not to rental income property. If your CPA or accountant treats parts of the property separately for tax purposes, be ready to do the same for the FAFSA.
- Recently incorporated businesses. If you just put your side business into an LLC last year, that is fine, but be ready to document ownership and employee counts.
- Spouses on the FAFSA. For divorced or separated parents, only the assets of the parent (and that parent's spouse, if remarried) whose income is reported on the FAFSA matter. If the business is owned by the other parent, it would not have been counted anyway.
- CSS Profile colleges. A subset of mostly private colleges use the CSS Profile in addition to the FAFSA for their institutional aid. The CSS Profile has its own rules and may still ask about business and farm assets. If your child is applying to CSS Profile schools, do not assume the same exclusion automatically applies for institutional aid.
The Bottom Line
For families with a qualifying business, family farm, or commercial fishing operation, the 2026-27 FAFSA is fairer than it has been the past two years. OBBBA puts back an exclusion that had been a quiet but real cost for self-employed and farm families. If you fall in that group, file (or re-check) your 2026-27 FAFSA carefully and watch your SAI drop. Then use that lower number to push for better aid offers.
If you want help comparing what each college will actually cost your family this year, given your new SAI, create your free CollegeLens plan. It walks you through net cost, scholarships, payment plans, and borrowing in one place, so you can see your bottom line before making decisions.
-- Sravani at CollegeLens