An informative and depressing piece in the WSJ last weekend nicely encapsulates the perverse incentives inherent in government sanctioned means-testing:
#1 – Don’t work. High income in your “base year” reduces aid eligibility. And for God’s sake don’t let your kids work — that’s even worse.
#2 – Don’t Save. It’s not like you had any advance notice that your kid would be 18 and heading off to college someday. Assets set aside for college count against aid eligibility. Saving by the student or by relatives is even worse.
#3 – Don’t Study. High grades indicate that the school might be a “safety school” (chosen in case the student is rejected by more prestigious schools) that the student is unlikely to attend, leading financial aid officers to make smaller awards.
#4 – Borrow Federally. If you must borrow be sure to get the subsidized federal loans rather than the icky private sector loans.
I have no doubt that this is all sound advice, which is what makes it so depressing.