5 ms·

Can any one explain what '...and typical assets means'? I took it to mean the value of normal things you own such as a house and cars. This seems like a massive

by mg1982 11y ago

Can any one explain what '...and typical assets means'? I took it to mean the value of normal things you own such as a house and cars. This seems like a massive caveat against the headline (basically anyone who owns their home), but since it's being ignored, I assume I'm wrong.

WalterBright 11y ago
It also implies that parents with modest incomes who scrimp and save for college tuition for their kids are kinda punished for it.
dantiberian 11y ago
I know of one family that run a profitable business and own ~10 rental properties. Their accountant has structured things such that they are making so little profit that they are able to get government subsidies for low income families. The 'typical assets' clause would probably be to disqualify people like that.
morgante 11y ago
Owning your own home would be considered fairly typical for an American household. It's to protect against people who have a million dollars in assets but make "only" $100,000 a year.
- sukilot 11y ago
  And support families who blow their income on fancy cars and vacations instead of saving
- sukilot 11y ago
  And support families who blow their income on fancy cars and vacations instead of saving
- sukilot 11y ago
  And support families who blow their income on fancy cars and vacations instead of saving
JabavuAdams 11y ago
The super-wealthy can play accounting games to have relatively low income but huge assets.
- harryh 11y ago
  That's largely a myth.
  - caminante 11y ago
    In what way?
    - harryh 11y ago
      As in it's something that people seem to think based on no real evidence.
      - caminante 11y ago
        I think I understand what you're getting at (i.e. it's not as widespread?), but at the same time, I can think of numerous situations where wealthy individuals use deductions and tax advantaged assets to shield income. Wealthy individuals have greater spending flexibility and access to things like trusts, asset relocation to no-tax locations, deductions, etc. In '09, 35K households with income over $200K reported 0 tax liability [1]. [1]http://www.businessinsider.com/some-of-the-wealthiest-pay-no-income-tax-with-help-from-certain-deductions-2012-5 http://www.businessinsider.com/some-of-the-wealthiest-pay-no...
        tiler 11y ago
        You do know what happened in 2007-2008 which allowed for this, right?
        caminante 11y ago
        If only the story hasn't been repeating...Here's a similar article from 2013 [1]. Right? [1]http://www.forbes.com/sites/beltway/2013/09/05/how-some-high-income-people-avoid-paying-federal-income-tax/ http://www.forbes.com/sites/beltway/2013/09/05/how-some-high...
bzbarsky 11y ago
The amount universities expect a family to pay for college in the US depends on two numbers: annual income and assets. A fairly typical formula for the expected family contribution is (income - allowance) * X + assets*Y, where the "allowance" depends on things like size of family, parents' ages, state of residence, etc, X varies from 22 to 47% depending on the size of (income - allowance) (and in particular there are various brackets in there, with different marginal rates, etc), and Y is generally about 5.7%. This is all for the parents; student income and assets are treated more harshly. All of which is to say that the college might think you can pay a lot because you have a lot of income, or because you have a lot of assets. What counts as "assets" varies also. Obviously things like bank accounts and stock investments are included, though retirement accounts are typically excluded. Home equity for the primary residence is included by many private colleges but not by the FAFSA's methodology (which is used by most public colleges, as I understand). So yes, this can be a massive caveat. Stanford does consider home equity as part of your assets, so if you have a fully paid off house they may effectively assume that you will take out home equity loans or a mortgage on it to help pay for the college education. Of course it's not that common for families with income of < 125k who have college-age kids to have a fully paid off expensive house. So in practice for many people this is not an issue. But there are absolutely people who are asset-rich and income-poor (think retirees!) for whom the fact that all this stuff is not purely income-based makes a huge difference.

by mg1982 11y ago

WalterBright 11y ago

It also implies that parents with modest incomes who scrimp and save for college tuition for their kids are kinda punished for it.

dantiberian 11y ago

I know of one family that run a profitable business and own ~10 rental properties. Their accountant has structured things such that they are making so little profit that they are able to get government subsidies for low income families. The 'typical assets' clause would probably be to disqualify people like that.

morgante 11y ago

Owning your own home would be considered fairly typical for an American household. It's to protect against people who have a million dollars in assets but make "only" $100,000 a year.

sukilot 11y ago
And support families who blow their income on fancy cars and vacations instead of saving
sukilot 11y ago
And support families who blow their income on fancy cars and vacations instead of saving
sukilot 11y ago
And support families who blow their income on fancy cars and vacations instead of saving

JabavuAdams 11y ago

The super-wealthy can play accounting games to have relatively low income but huge assets.

harryh 11y ago
That's largely a myth.
- caminante 11y ago
  In what way?
  - harryh 11y ago
    As in it's something that people seem to think based on no real evidence.
    - caminante 11y ago
      I think I understand what you're getting at (i.e. it's not as widespread?), but at the same time, I can think of numerous situations where wealthy individuals use deductions and tax advantaged assets to shield income. Wealthy individuals have greater spending flexibility and access to things like trusts, asset relocation to no-tax locations, deductions, etc. In '09, 35K households with income over $200K reported 0 tax liability [1]. [1]http://www.businessinsider.com/some-of-the-wealthiest-pay-no-income-tax-with-help-from-certain-deductions-2012-5 http://www.businessinsider.com/some-of-the-wealthiest-pay-no...
      - tiler 11y ago
        You do know what happened in 2007-2008 which allowed for this, right?
        caminante 11y ago
        If only the story hasn't been repeating...Here's a similar article from 2013 [1]. Right? [1]http://www.forbes.com/sites/beltway/2013/09/05/how-some-high-income-people-avoid-paying-federal-income-tax/ http://www.forbes.com/sites/beltway/2013/09/05/how-some-high...

bzbarsky 11y ago

The amount universities expect a family to pay for college in the US depends on two numbers: annual income and assets. A fairly typical formula for the expected family contribution is (income - allowance) * X + assets*Y, where the "allowance" depends on things like size of family, parents' ages, state of residence, etc, X varies from 22 to 47% depending on the size of (income - allowance) (and in particular there are various brackets in there, with different marginal rates, etc), and Y is generally about 5.7%. This is all for the parents; student income and assets are treated more harshly. All of which is to say that the college might think you can pay a lot because you have a lot of income, or because you have a lot of assets. What counts as "assets" varies also. Obviously things like bank accounts and stock investments are included, though retirement accounts are typically excluded. Home equity for the primary residence is included by many private colleges but not by the FAFSA's methodology (which is used by most public colleges, as I understand). So yes, this can be a massive caveat. Stanford does consider home equity as part of your assets, so if you have a fully paid off house they may effectively assume that you will take out home equity loans or a mortgage on it to help pay for the college education. Of course it's not that common for families with income of < 125k who have college-age kids to have a fully paid off expensive house. So in practice for many people this is not an issue. But there are absolutely people who are asset-rich and income-poor (think retirees!) for whom the fact that all this stuff is not purely income-based makes a huge difference.