How Colleges Punish Families Who Choose to Save

[xchrom]

http://www.theatlantic.com/business/archive/2011/09/how-colleges-punish-families-who-choose-to-save/245901/

hroughout the U.S., millions of parents struggle to save for their children's college education. It isn't easy: in a consumer culture like ours, there's always something new to buy. Driving an older car, using an out-of-date computer, and ignoring cool new gadgets like the iPad aren't easy -- particularly when you've got some income that you could be spending on such luxuries. No wonder seeing the U.S. savings rate as high as 6% is unusual. But those parents who do the responsible thing and save are discriminated against: students whose parents save less often qualify for more financial aid.

If you or one of your children has gone to college over the past 15 years, then you're probably familiar with the Free Application for Federal Student Aid ("FAFSA"). This is a form that must be filled out by anyone hoping to get financial assistance for college. It requires a heap personal and financial information about a student's family, such as income, savings, and investments. Using this data, the government calculates how much financial aid the it will provide the student through grants and loans.

FAFSA's influence doesn't begin and end with the government. Many colleges also use the form as a way to streamline the information needed for their financial aid process. Like the government, many colleges also take savings into consideration.

From a pure logic standpoint, this makes sense: if a family has savings with which it can pay for college tuition and related expenses, then it should. But this logic has a clear flaw -- saving doesn't get there by accident; it is a behavior that you generally have some control over. Unless a family has very high income, it can always spend its income on something else instead of saving if it chooses. And those very high-income families wouldn't qualify for aid anyway.

[woodsprite]

1. A lot of families I know are trying to get jobs at universities

Most give a break on kids tuition if you're an employee. Some give a child's tuition as a benefit (still expected to pay for housing, dining, health fees and books). Even custodial and groundskeepers are counted in the benefit in some schools. It's definitely worth looking into. My friend got her daughter through college in NJ and now is using her 'benefit' to put herself through school to change careers.

[david_vincent]

3. On top of that, some colleges

(such as the one where I work) are members of tuition exchange organizations. This means that the children of people who work at other member colleges can go to school at any other member college for free.
We've had two kids (siblings) come to the college at which I work whose parents work at a college in Maine. They got to come here for free, because both my college and the one at which their parents work are members of the same tuition exchange program.

[Bonhomme Richard]

2. We realized that when our first went to college 20 years ago.

We didn't have anything saved and we realized how badly we would have been penalized if we had the ability to save.

[Demeter]

4. You don't even have to have cash savings

Just owning a house is bad enough.