Will a life insurance policy affect FAFSA at all?

The Free Application for Federal Student Aid (FAFSA) is a form that students or their parents fill out to determine their eligibility for financial aid, including federal grants, loans, and work-study programs. The FAFSA considers various factors such as income, assets, and household size when determining a student's Expected Family Contribution (EFC). When it comes to life insurance policies, they are generally not considered an asset for the purpose of FAFSA. This means that a life insurance policy will not directly impact your eligibility for financial aid, nor will it affect your EFC. Life insurance policies are not counted as assets on the FAFSA because they are considered a form of protection, rather than an investment or a source of income. However, it is important to note that the cash value of a life insurance policy could be counted as an asset if you withdraw it or take out a loan against the policy. Any amount that is withdrawn or borrowed from a life insurance policy would be considered income for FAFSA purposes and could impact your eligibility for financial aid. In summary, having a life insurance policy will generally not impact your FAFSA eligibility, but any cash value that is withdrawn or borrowed from the policy may be counted as income and could affect your financial aid.