An S Corp is a pass through entity, so business income passes through to your parents’ 1040 in addition to the W2 wages they pay themselves.
In most cases, CSS schools will ask for the business supplement in addition to the 1120s for the S Corp, which allows them to see everything. You’ll also be asked to report the business value.
There are some cases where a family owned business an avoid some of this reporting but I’m unaware of any cases wrt the super generous FA schools. For some of the schools that are FAFSA only you might not need to report.