FAFSA, the Free Application for Federal Student Assistance, is the form that all student loans and many college scholarships are based on. It calculates what the family should be able to contribute to the student's college costs. FAFSA includes income, savings and assets but not the other side of the balance sheet - the level of family debt. It also does not take into account taxable withdrawals from IRAs and 401Ks used by families to pay for college costs, or even the cost of continuing at the current college. The result of this is to shift most of the debt to parent loans (parent loan repayment is not delayed until students graduate). This increases overall family debt but is also not included in FAFSA calculations. The FAFSA form needs to be changed to account for parents' debt.
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