Out of nowhere these two questions just popped into my mind this morning, on the subject of financial aid:
1. At what age do colleges stop looking at parent income?
2. Why do they do so at all for 18-year-olds, who are legal adults in all 50 states?
11 comments:
The FAFSA thresholds are kinda high. If memory serves me, you are not considered independent unless you are married, in the military, or 24. However, I have a 22 yr old who is independent, but not so for FAFSA.
There are a list of criteria for a student for the parents' income to be excluded. A quick search brought me to the guidelines. It looks like 23, except for a number of specified cases (in the military, married, has dependents, etc.) Not being a dependent of your parents alone does not make you independent, but it can be among factors considered for the school to which you are applying to allow a status override.
As for why, it seems reasonable as long as you are listed as a dependent by your parents for income tax purposes: if we are distributing aid for the purpose of helping lower-income students, then we need some way of keeping a rich kid from claiming no income because he lives off Mommy and Daddy. Beyond that, I don't have a good answer.
My guess is they look at parent's income when the child is still claimed as a dependent on income taxes.
18-year-olds aren't necessarily emancipated. And many shouldn't be. Are you saying they should be on their own or not? Because if they are still dependent, parental income should matter. If they've moved out and are emancipated, it shouldn't. Tough to guage.
I can understand if they're still listed as dependents on taxes, but if they're not? Who determines if an 18 year old is "emancipated"? They can vote, sign contracts, join the military, work without a work permit--legally, that sounds emancipated to me.
I have yet to figure out the formula they use to compute "parents contribution" after helping 3 children through college. Full and partial scholarships, student loans and college professor discounts helped.
The feds go further than simply assuming that your parents help you out with costs. They pretty much mandate it. 18 year olds whose parents refuse to help pay costs are given the same amount of money as 18 year olds whose parents fork up a lot.
It's one of the few sensible things the government ever did, since as bad as our school loan bills are, they'd be worse if we allowed parents to bow out and treated all 18 year olds as independents.
This is old news; there used to be the occasional hard luck story back in the 80s, but these days, everyone (usually) knows about it.
I think the "cure" is worse than the "disease". Why should one adult be financially responsible for another adult, especially in a case like DADvocate's? And why is a 21-yr-old former military person on their own financially, but a 22-yr-old who's been in college since high school still have mommy and daddy's finances required?
The colleges are practicing what economists call "price discrimination." Wikipedia has a reasonable article on the subject.
The basic idea is that they want to collect more from those students who are capable of paying more (in this case, "capable of paying more" includes parents who will pay). It has nothing to do with "fair" or treating people like the adults that they legally are.
If some kids (and their parents) will spend $50K/year, the colleges want this from them. If other kids can/will only spend $25K/year, then the college would like to charge *these* kids that much, while still being able to charge $50K to those kids who can and will pay $50K. The trick in this sort of thing always comes down to figuring out who can/will pay the higher price and who can't/won't.
I suspect that taking parental income into account is a fairly effective mechanism, on average, for this binning.
-Mark Roulo
Mark is correct from the collee standpoint; the other criteria is tax status. If the parent declines dependent status, then their income should be irrelevant --but, again, a nice tax bump fo the rich.
Bless you.
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