Key Points
- The FAFSA will no longer count small business and family farm assets starting in 2026.
- New Workforce Pell Grants will support short-term training programs.
- Students with high Student Aid Index values or full grant aid from other sources may lose Pell Grant eligibility.
Small business owners and family farmers will soon get a break when applying for college financial aid. Under the final Senate version of the One Big Beautiful Bill, the Free Application for Federal Student Aid (FAFSA) will no longer include the net worth of small businesses or family farms when calculating aid eligibility. This change takes effect starting on July 1, 2026, and can be applied immediately to the 2026-2027 award year.
Currently, families must report business and farm assets, even if they do not generate significant income. Beyond the fact that it can be hard (or impossible) sometimes to quantify the value, any value can seriously impact financial aid.
Removing these from FAFSA calculations will likely increase aid eligibility for thousands of families whose wealth is tied up in non-liquid assets. The change is expected to reduce paperwork, avoid unintended financial penalties for entrepreneurship, and better target federal aid.
The exclusion applies to the Student Aid Index calculation for both dependent and independent students and will be reflected in Pell Grant determinations for academic years beginning on or after July 1, 2026.
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What Are The Criteria To Exclude Small Business Assets?
Currently, the value of a small business or family farm must be included as an asset on the FAFSA. Starting in 2026, that's not required if your business meets the following requirements:
Small Business: You don't have to report a small business with less than 100 full-time or full-time equivalent employees that is owned and controlled by the family.
Family Farm: You don't report a family farm on which the family resides.
Commercial Fishing Business: You don't report a commercial fishing business and re-lated expenses, including fishing vessels and permits owned and controlled by the family.
Pell Grant Program Adds New Limits But Also New Uses
The new bill adds both restrictions and new uses for Pell Grants.
On one hand, it limits Pell eligibility for students with high Student Aid Index (SAI) scores. A student whose SAI equals or exceeds twice the maximum Pell Grant award will no longer qualify for the grant starting in the 2026-2027 award year. This cap aims to restrict grants to lower-income households and avoid so-called "Pellionaires".
On the other hand, the bill creates a new Workforce Pell Grant program for short-term training. Beginning July 1, 2026, students enrolled in short workforce-aligned programs (ranging from 150 to 600 clock hours) can receive a prorated Pell Grant if they meet eligibility rules.
These programs must be approved by state governors, aligned with high-wage, in-demand industries, and lead to recognized credentials.
The Department of Education must also verify job placement and completion rates, ensuring the programs show strong student outcomes. The goal is to expand access to federal funding for students pursuing short-term career credentials outside traditional degree paths.
Other Pell Grant Eligibility Changes
Alongside the new Workforce Pell option, the bill adds another restriction: students receiving non-federal grant aid that meets or exceeds their cost of attendance will no longer qualify for a Pell Grant. This applies to state, institutional, and private grants. In effect, students with full-ride scholarships will not receive additional Pell funds, even if they meet income criteria. That change also takes effect for the 2026-2027 school year.
The bill also clarifies that foreign income will now be included in Pell Grant eligibility calculations for both dependent and independent students. Previously, some types of foreign income may have been excluded or treated inconsistently.
Going forward, all income will be aggregated under a consistent definition, strengthening the fairness and transparency of the formula.
Final Thoughts
These Pell Grant changes appear to be a net positive for students. There was concern that Congress might increase the credit hours required to receive a full Pell Grant, but that has been removed from the final bill.
The net result is that more families can receive federal financial aid, more uses are allowed via the Workforce Pell, and the only real drawback is for those who are receiving a full-ride scholarship anyway.
The bill also increases the authorized funding for the Pell Grant program to avoid future shortfalls. The maximum annual shortfall covered by automatic appropriations will rise from $2.17 billion to $12.67 billion. This increase is intended to protect the long-term solvency of the program, especially with the addition of new recipients under the Workforce Pell program.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.