Reply to "Typical Assets" as considered by University Financial Aid departments

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[quote=Anonymous][b][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I see no difference btw 2mm in wealth in your vanguard retirement account and 2mm in your home and 2mm in lottery winnings in non-retirement (you can’t put it in retirement beyond 7k a year).

We’re all saving money for the same thing - our future.

I don’t know why colleges care.  Instead of taking 5% of non retirement and maybe home equity blah blah, they should take a flat 2% of everything.  You can borrow against any asset. [/quote]

Because as a matter of public policy, requiring parents to use retirement assets is A Very Bad Idea.  We *want* people to (i) save for retirement, and (ii) have sufficient funds to live on in retirement.  If someone is has two kids, and knows that a significant portion of any retirement assets they save are going to be diverted to pay for college, that disincentivizes retirement savings.  Then, we have a retirement crisis, in addition to higher education costs further spiraling.

I'm with you on the homes, though.  [/quote]

Yes, well what if our home is our main retirement asset? How is that fair?[/quote]

Well, a home isn't a "retirement asset" - it's an asset that you plan to use for retirement.  A retirement asset is one that is given preferential tax treatment by the IRC.

And that's really the crux of it.  [b]Colleges don't want to be in the business of determining what constitutes a "retirement asset" for every family (and not only because every family will argue that every asset is meant for retirement, so none should count).  Tey have to have a bright line rule, so they use retirement accounts.  That seems pretty reasonable to me. [/b]

But apart from what I think, home value isn't considered in FAFSA, and only minimally in the CSS.  [/quote]

It seems reasonable to you, because we’re used to it. Why use this at all?  I don’t buy a home based on my income. My knee replacement isn’t by HHI. My IRA isn’t “sheltered” when figuring out the price for .. anything but college.

Why not just price college lower? With state school options and low rate government loans?  This is a crazy “only in America” system.   Let’s be more like Canada. Or anywhere!  Tell us the price upfront!![/quote]

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