Darcy Wemark’s and Eric Wemark’s college student son and daughter, respectively, are studying animal husbandry and agricultural business, expertise that’s key to the future of their family’s crop-yielding, cattle-herding, 1,400 acres in Iowa.
Currently, income-based federal Pell Grants help collegians Carson Wemark and Addison Wemark cover the combined $35,227 annual cost of attending Iowa Central Community College and the University of Wisconsin at Platteville. On those campuses, they are learning such skills as how to use gadgets that monitor cows’ health to prevent extreme illness and how to turn a profit by accurately calculating future crop prices.
“Gone are the days when you could work hard and get by,” said Eric Wemark, a fourth-generation farmer in Decorah, population 7,700. “I went to school for mechanics to fix tractors, cars and other farm equipment. It’s not enough knowledge for what’s needed to run a farm now.”
Whether the Wewmarks, and other working- to middle-class U.S. farming families with kids in college, lose financial aid during the 2024-25 and future academic years may depend on whether family farms continue to be listed as an asset on the federal Free Application for Federal Student Aid, commonly called FAFSA.
Courtesy of Thomas Harnisch
Thomas Harnisch, vice president for government relations, State Higher Education Executive Officers Association
In 2024-25, for the first time on FAFSA, farm value will be deemed an asset, raising the likelihood that students will get smaller federal Pell Grants and state grants than in prior years. As with previous FAFSA forms, families will continue to be required to report money in checking and savings accounts; non-retirement accounts, including 529 college savings plans; and second homes. In addition to family income, those assets help government financial aid agencies and schools decide who qualifies for aid and how much.
The term used for the asset on the FAFSA form is investment farm. It is defined as the income-producing
As many families aim to avoid such errors as listing on FAFSA their farmhouse, areas of the yard and such that are not used in professional farming, Washington lawmakers are working to reverse the new rule regarding assets. But that could take some time.
Meanwhile, that rule is a problem, said Thomas Harnisch, the State Higher Education Executive Officers Association’s vice president for government relations: “For family farmers and small business owners, the net worth of their assets does not easily translate into liquid income to finance a college education. Most cannot easily sell off a portion of their business or farm to help pay for college expenses.”
According to a report that Iowa College Aid released in February 2023, if family farms are part of financial aid calculations, FAFSA-filing farm-owning parents with an adjusted gross income of $60,000 and two dependents would be expected to contribute anywhere from $7,626 to more than $17,000 during an academic year. The remaining cost of attendance is considered a student’s financial need, to be met through student loans, federal or state grants or aid from the college.
Lawmakers working to reverse new FAFSA farm formula
“At a time of declining college enrollment, particularly in rural regions, this provision is a step backward for students, families, and states,” Harnisch said. “We remain concerned over the effects of this change on economic growth and job creation, as small business and family farms are the lifeblood of so many communities.”
U.S. Sen. Charles Grassley (R-Iowa) is among supporters of the proposed Family Farm and Small Business Exemption Act, which would “restore the exemption of family farms and small businesses from the definition of assets under title IV of the Higher Education Act of 1965.”
Courtesy of U.S. Sen. Charles Grassley
U.S. Sen. Charles Grassley (R-Iowa)
“The Education Department’s failure to recognize the unique economics of the family farm could deprive students from these families of financial aid that they could otherwise receive,” said Grassley, whose state is second to California in agribusiness. “That’s because family farm cash flows can fluctuate drastically depending on the time of the year, and most receipts are immediately reinvested in inputs for the next year’s growing season. The Education Department should recognize the financial realities of family farms when determining eligibility for student aid.”
After California and Iowa, the other leading farming states are Nebraska, Texas, Illinois, Minnesota, Kansas, Indiana, North Carolina and Wisconsin, according to the U.S. Department of Agriculture.
Nationwide, owners of small family farms, which have an annual gross farm cash income of no more than $350,000, account for 88% of farmers, 46% of farmland and 19% of farm products that were sold, according to USDA data released in 2021. Many of those farmers are farmers’ market vendors; they are twice as likely as large-scale farmers and three times as likely as mid-sized farms to sell products directly to consumers.
But it’s extremely difficult for farmers to predict income, Harnisch said. Farmers can lose money in some years, even in perfect weather for production, given that prices for items such as milk and grains aren’t set locally. Also, prices can be set so far in advance that farmers aren’t able to forecast their net costs of production. The Wemarks, for example, lost money last year because of a drought and milk prices.
Given those fluctuations, observers suggest that farm families carefully complete the FAFSA.
Expert tips on farm valuation, special circumstances
What officials are calling a simplified FAFSA form allows families, still, to deduct the value of their homes. They also can deduct the value of the land immediately surrounding their homes, including plots where they grow food they themselves eat. The farm value includes equipment and land actively used for farming. Families must exclude equipment not being used to produce farm income.
Neither should previous years’ estimates nor appraisals that seem too high be included.
College financial aid officers sometimes offer their judgment on these issues, mediating families’ challenges to the accuracy of federal estimates of how much aid their students should get. That professional judgment can be sought, for example, when current farm income is different from that reported on the prior year’s IRS filings.
Also, a family can file a form asking to be re-evaluated if a primary wage-earner loses non-farm related employment or a substantial share of non-farming income; there are large, unreimbursed medical or dental expenses; or other major changes in their financial circumstances.
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New York-based author and journalist Reyna Gobel covers personal finance, health and travel. Her work has appeared in CBS Money Watch, Money, The Fiscal Times, Harvard Health, Reuters Health and other publications.
