For the White House, it’s standard operating procedure to deliver bad news on Fridays, knowing that no one really reads newspapers on Saturdays. Well, they’re at it again, and this time they’re playing shell games with student financial aid.
Last week, President Bush slipped a little-noticed provision into his budget proposal that promises to make it harder for underprivileged students to receive federal financial aid.
The budget provision centers on so-called 529 plans, or savings plans that allow parents to save money for their child to attend college. Currently, parent-funded 529 plans are counted as assets in the Free Application for Federal Student Aid (or FAFSA), which means that those with 529 plans have a lesser chance of receiving federal financial aid.
According to the Securities and Exchange Commission, 529s are enormously popular – all 50 states and the District of Columbia offer some form of college savings plan. Even so, the SEC acknowledges that 529 plans aren’t for everyone, saying that those who are still considering “”buying a home, saving for retirement, or paying off high interest credit card bills”” (read: poor people) might not have the financial wherewithal to invest in a 529.
That was all fine and well in the world of financial aid, though, because the federal government had a great equalizer, the FAFSA, that made it harder for those with 529 plans to receive federal financial aid, presumably on the assumption that those who had already invested money didn’t need scholarships and grants from the government.
But Bush is proposing that 529s shouldn’t be counted in the FAFSA, which would make it easier for those with college savings plans to claim federal financial aid at the expense of those who don’t have (or aren’t able to have) savings investment plans.
Those in the financial community argue that exempting 529s from the FAFSA will encourage more students to invest in college savings plans, while administration officials say that the proposed policy will make the FAFSA process simpler and more uniform.
Such assertions assume that those who aren’t already investing have the money to do so, and they assume that parents won’t shift more assets to 529s to get more federal financial aid than they’re entitled to.
Whatever the motivation behind this proposed policy, it’s fairly easy to pinpoint the people who stand to benefit the most: the wealthy. They are, after all, the only ones who can afford to set aside enough of their income to invest in 529s, and once they know it won’t be counted against them on the FAFSA, they’ll be able to collect financial aid to boot.
This rather perverse outcome stands in direct contrast to the stated purpose of federal financial aid, which is to assist students who simply can’t afford the swiftly rising costs of higher education.
In the interest of fairness, then, all assets – income, savings and, yes, 529 plans – should be considered when students are applying for federal financial aid. As tuition rises and the middle class shrinks, underprivileged students will have enough competition for financial aid; there’s no need to tilt the playing field even further in the direction of the wealthy.
Opionions Board
Editorials are determined by the Wildcat opinions board and written by one of its members. They are Justyn Dillingham, Allison Hornick, Damion LeeNatali, Stan Molever, Nicole Santa Cruz and Matt Stone.
