What income and asset protection allowances does the FAFSA give parents?

The formula shields part of your finances before assessing a contribution. On the income side, allowances subtract taxes paid, an employment expense allowance, and an income protection allowance scaled to family size, so a chunk of income is never touched. On the asset side, an asset protection allowance historically sheltered some parental assets, though recent formula changes reduced or effectively eliminated it for many families. Retirement accounts and primary-home equity are excluded outright. Because these thresholds are recalibrated periodically by the Department of Education, don't rely on a fixed dollar figure from an old article. The practical takeaway: lower-income families often see much of their income protected, while asset sheltering has become thinner than it used to be.