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Comment by dragonwriter | Hacker News Reader

Why does it seem odd that assets as well as income would be factored in to conputation of ability to pay?

Its obvious why it is set up this way. That said, it can be hard to see other people who make the same wage, spend it all on fancy cars and a bigger house get more aid when you've been living modestly and saving resulting in less aid.

The problem is when the assets are derived from the income. In a situation with a stable income, saving money has an effect similar to the money getting counted twice.

If two very similar families start with the same assets, and then have the same income for fifteen years, they should get the same aid.

If there was some external windfall, by all means expect some of that to go to college payments. But if a family simply spent less, why should that increase expected payment?

Because such approach rewards irresponsible people who just blow away all their income on expensive vacations, new gadgets every year, third family car, etc. and penalizes people who diligently save for the retirement?

It's not odd. Assets can be sold for income.

We're just not used to thinking about it that way because, in terms of taxes, assets always get special treatment because the ultra wealthy hold the majority of their wealth through assets instead of income. And so, we do as they wish.

It’s specifically odd here because it’s pretty reasonable to say that retirements savings (which initially came from income) shouldn’t factor into a family’s expected contribution to a child’s college education, for the same reason it would be odd to double tax income and then the assets that you buy with the income.

Retirement savings are in fact excluded from parents' assets for the purposes of FAFSA, at least if they are in some kind of account legally recognized as a retirement account (401k, 403b, IRA, traditional pension, annuity, etc.). Details of what is included and excluded from parental assets: https://studentaid.gov/2324/help/parent-investments

Because the thing being calculated is the expected family contribution. I wouldn’t expect investments for retirement to be used to contribute to a child’s education.

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