GRS Home  Forum Home
Bank Rates Center
   Savings Account Rates
   Money Market Rates
   Highest CD Rates
Insurance Rates Center
  Auto           Health
   Life              Home
Mortgage Rates Center
  Mortgage Rates
  Mortgage Quotes

Last visit was:
A place for Get Rich Slowly readers to ask questions
and exchange ideas
It is currently Sun Apr 20, 2014 3:47 am




Post new topic Reply to topic  [ 18 posts ]  Go to page 1, 2  Next
Author Message
 Post subject: Is it ethical to game the system?
PostPosted: Tue Oct 12, 2010 12:08 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1558
Location: Seattle, WA
I originally posted the following in the discussion "How much are you saving for your children's education" http://www.getrichslowly.org/forum/viewtopic.php?f=2&t=13172

stannius wrote:
Under current FAFSA rules, if you have less than 50k income you don't have to report your assets. If that rule is still in place in 18 years, we might retire and live off savings for a few years. Anything left over in the 529 could be transferred to a niece, nephew, grandchild etc. Or even used for our own adult education after retirement.


tazdollars objected:

tazdollars wrote:
So you're going to quit work for a few years so that your child can get federally subsidized loans that you wouldn't qualify for if you had to disclose the assets you had saved up for your child's education?

Wow. Just wow. :roll:

Maybe you should go ahead and put your house in your child's name so you can qualify for a Medicaid nursing home.


I thought the original discussion was getting derailed so I moved it here (manually, I'm not a mod.)


Top
Offline Profile   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Tue Oct 12, 2010 12:09 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1558
Location: Seattle, WA
stannius wrote:
Yes, if the same rule is in effect I would have no qualms about doing so. I don't see a problem with maximizing the use of benefits offered to me, under the rules specified and without lying or hiding anything.

Would you turn down the mortgage interest deduction just because you could afford a house without it? Would you turn down unemployment compensation because you have a fully funded emergency fund?


tazdollars wrote:
Neither of the programs you mention are means-tested. You're basically artificially deflating your income so your child can qualify for financial aid programs designed for kids with parents that don't make much money.

I came from a family where we didn't have to lie to look poor, so you'll forgive me if I'm think your plan is disgusting. When I was a kid, I would go with my mom to pick up government cheese when it was available (they just handed it out to whoever showed up without making folks fill out an application or confirm their income). What you're doing is no different than the skin flints who made plenty of money, but who just liked to get their free government cheese.


Top
Offline Profile   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Tue Oct 12, 2010 12:42 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1558
Location: Seattle, WA
I would probably not go for government cheese, nor would I seek treatment at a free clinic just to save a few bucks.

On the other hand, I consider the dollars in question here to be coming from the federal budget, which is for practical purposes unlimited - that is, so large that my personal actions do not have an effect on it. Not that this justifies fraud nor cheating on one's taxes.


Top
Offline Profile   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Tue Oct 12, 2010 1:13 pm 

Joined: Tue Sep 23, 2008 6:05 am
Posts: 330
Well, this is only my personal opinion, but we're not really talking about criminal fraud here, are we? We're talking about qualifying for loans where the government is going to get their money back, and most likely even make a small profit on it, right? All the while, going towards a child's education?

I can understand it if someone views this as being morally reprehensible. As far as any system gaming goes though, this seems to be one of the more benign.


Top
Offline Profile   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Tue Oct 12, 2010 4:09 pm 
Moderator

Joined: Wed Sep 23, 2009 9:01 am
Posts: 5209
I can see both sides of it. But the bottom line is that rules are put in place to tell people what they need to do for whatever. I think it is a little extreme to quit one's job just to get school paid for. I assume the rules contemplate people doing this kind of thing. Perhaps the assumption is that if someone really wants the handout and is willing to sacrifice their income for it, well, let them. Seems penny-wise and pound-foolish to me.


Top
Offline Profile E-mail   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Tue Oct 12, 2010 4:11 pm 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
I see nothing wrong.

The FAFSA rules are ridiculous. My financial aid shouldnt be determined by parents financial standing. I knew a guy who couldnt get loans or grants others could get because of his parents finances, yet those same parents wouldnt help pay for his school. Instead he had to get up at 3AM and stock shelves 6 days a week to get by.

I understand the spirit of the law, but I disagree with its application.


Top
Offline Profile E-mail   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Tue Oct 12, 2010 4:13 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1558
Location: Seattle, WA
ekrabs wrote:
Well, this is only my personal opinion, but we're not really talking about criminal fraud here, are we? We're talking about qualifying for loans where the government is going to get their money back, and most likely even make a small profit on it, right? All the while, going towards a child's education?


Yes, reportedly the majority of federal financial aid comes in the form of loans and work study.

You could probably take out the loans, take withdrawals from a 529 in the same year and use that to pay the loans immediately. Doing so could be worthwhile if you also got some non-loan financial aid.

On the other hand institutional aid might lean more towards scholarships. But institutions have their own ways of determining aid distribution, so the ploy in the OP might not even work. It really depends on the specific school in question.


Last edited by stannius on Tue Oct 12, 2010 4:36 pm, edited 1 time in total.

Top
Offline Profile   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Tue Oct 12, 2010 4:35 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1558
Location: Seattle, WA
DoingHomework wrote:
I can see both sides of it. But the bottom line is that rules are put in place to tell people what they need to do for whatever. I think it is a little extreme to quit one's job just to get school paid for. I assume the rules contemplate people doing this kind of thing. Perhaps the assumption is that if someone really wants the handout and is willing to sacrifice their income for it, well, let them. Seems penny-wise and pound-foolish to me.


It really depends - to look at it the other way, is it worth working if most or all of the income is going to be taken in the form of Expected Family Contribution?


Top
Offline Profile   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Wed Oct 13, 2010 7:57 am 
Moderator

Joined: Wed Sep 23, 2009 9:01 am
Posts: 5209
stannius wrote:
It really depends - to look at it the other way, is it worth working if most or all of the income is going to be taken in the form of Expected Family Contribution?


We'd be talking about not working at a $50k/yr+ job so the question would be whether the scholarship/grant is worth more that $50/yr after taxes etc. I think in most cases it would not be.


Top
Offline Profile E-mail   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Wed Oct 13, 2010 8:44 am 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1558
Location: Seattle, WA
DoingHomework wrote:
We'd be talking about not working at a $50k/yr+ job so the question would be whether the scholarship/grant is worth more that $50/yr after taxes etc. I think in most cases it would not be.


Fair enough. Especially since most of the aid would probably be loans. You don't want to let the tail wag the dog - it would be like not working just to avoid paying taxes.

One thing you could do is something with a high probability of failure but a small chance of a huge reward. I.e. start a small business or tech startup. Work on it for a couple years plowing revenues (if any) into the business.

In my situation, it was about the time I was considering retiring anyways. (Though as I said in the original thread, it's really too far off to make any real plans.)

As far as the ethics, would it be more ethical if the parents used the time off to volunteer?


Top
Offline Profile   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Wed Oct 13, 2010 10:32 am 
Moderator

Joined: Wed Sep 23, 2009 9:01 am
Posts: 5209
What about a teacher that racks up student loans and then teaches on an indian reservation or inner city school for a couple of years to have the loan forgiven. If the teacher could have worked at a school in a nice area making a lot more money, how is that different?

And how ethical is the current system? What if you have rich, high income, but otherwise deadbeat parents that kick you out with nothing when you are 18. You can't get financial aid just because the government says they ought to be helping you. That doesn't seem to fair.

So why not have the government pay for all college and fund it through elimination of the deduction for having kids?

I don't have any kids so I could not personally take advantage of this loophole or whatever you want to call it. But I am personally more comfortable with someone quitting their job for a few years to make it easier for their kid to get financial aid than I am with making kids suffer because their parents refuse to help when the government has decided they should. And that situation is very common!


Top
Offline Profile E-mail   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Wed Oct 13, 2010 11:40 am 
Moderator

Joined: Wed Sep 23, 2009 9:01 am
Posts: 5209
Quoting the whole original post I'm responding too since it was under a different topic before that wasmoved:

tazdollars wrote:
Neither of the programs you mention are means-tested. You're basically artificially deflating your income so your child can qualify for financial aid programs designed for kids with parents that don't make much money.

I came from a family where we didn't have to lie to look poor, so you'll forgive me if I'm think your plan is disgusting. When I was a kid, I would go with my mom to pick up government cheese when it was available (they just handed it out to whoever showed up without making folks fill out an application or confirm their income). What you're doing is no different than the skin flints who made plenty of money, but who just liked to get their free government cheese.


While I can understand the why you are offended Taz, I think your indignation is a little misplaced. The government cheese program was itself more of a handout for political purposes to support the milk lobby. If you want to talk about gaming the system, that entire program would make a good example of how not to do things!

I'll take your word for it that you grew up poor. But you have succeeded - you are a lawyer as I recall. You got through college and law school somehow. And based on what you have said previously your finances are in great shape.

I grew up soundly middle-class. My dad had a good government job and my mother mostly stayed home. We went on vacation most years (usually camping but sometimes flying to Disneyworld or the beach) and there was always food on the table. We got government cheese a few times but only because someone gave it to us when they got more than they needed.

When it came to going to college my family could only afford minimal support. This was pre-FAFSA but there was an expectation that they contribute far more than they could afford. So I was caught in the middle. My father made too much for me to get any kind of grants or other aid. I had a couple of scholarships based on merit though they were small. But I could not qualify for anything based on need.

The system is flawed. Yet the rules are clearly laid out. I might agree that it is wrong for people to exploit the system if it takes away from those truly needing help. But it doesn't. If Stannius implemented his plan we(all taxpayers) might be subsidizing him but no individual student with needs actually suffers. The entire program just costs a little more. I fail to see this as being any more unethical than taking advantage of a legal tax loophole.

If Stannius's kid is in competition with a more needy student then I would say he should bow out and pay up. But it doesn't work that way.


Top
Offline Profile E-mail   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Thu Oct 14, 2010 7:31 pm 

Joined: Sat Dec 29, 2007 9:30 am
Posts: 570
need-based government grants are not all that much money compared to the average cost of tuition. work study is essentially getting placed in a low paying but generally networking-useful part-time job on campus. and the other major need-based benefit is what, subsidized student loans? right, so you can take those loans out and not pay interest on them until 6 months after you graduate.

the interest and the little bit of grant money is certainly helpful in the use-everything-you-can philosophy, but it seems a little ridiculous to go to such great extents to use a loophole when simply earning the $50k per year and handing it to the kid (and letting those need-based dollars go to those with real need) is a perfectly reasonable alternative.

the need-based dollars, those are not infinite. and that's where i would take issue personally.


Top
Offline Profile   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Wed Oct 20, 2010 4:17 pm 
User avatar

Joined: Wed Oct 20, 2010 3:53 pm
Posts: 2
Location: Minneapolis
I put myself through school while working full time. My parents were in massive debt but they made enough money that I couldn't get any tuition assistance. At the end of my education I tallied it up and it turned out that I paid as much in taxes as my peers were getting in tuition assistance/grants while not working at all. Neither of our parents were in a position to help us. The system is broken, work it to your advantage.

_________________
Me in acronyms: CDPE, CFA, MBA
Me in HTML: http://www.minneapolishouses.org/ and http://www.minneapolishouses.org/
Me in binary: 01001101 01101001 01100011 01101000 01100001 01100101 01101100


Top
Offline Profile E-mail   
 Post subject: Re: Is it ethical to game the system?
PostPosted: Thu Oct 21, 2010 3:54 am 

Joined: Mon Aug 31, 2009 4:24 am
Posts: 53
Location: Petaluma, CA
I'm personally not sure I get the point of going two years without any income at all and living off your savings. Wouldn't it cost less to use these savings for your kid's education instead? Not to mention, going back to work isn't always easy, a two-year gap might not help your case, and you wouldn't be able to get employer match without an employer.


Top
Offline Profile   
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 18 posts ]  Moderators: kombat, bpgui, JerichoHill Go to page 1, 2  Next


Who is online

Users browsing this forum: No registered users and 2 guests


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot post attachments in this forum

Search for:
Jump to:  
Powered by phpBB © 2000, 2002, 2005, 2007 phpBB Group
Theme created StylerBB.net & kodeki