Mon 12 Sep 2005
More financial aid fun from the Boston Globe.
Morton Schapiro was caught in the middle, between his parents and his children.
”When my parents gave money to their grandchildren [for college], they put it in their names, not the kids,” he said. ”I cringed.”
Morty has some smart parents! Naifs in the world of college financial aid should understand that when the Schapiro grandparents give $500 to Morty’s children in the children’s names, then the colleges to which the children apply will count that money against any potential grants or awards, almost dollar or dollar. But, if the money is in the grandparents’ names, the colleges may not even be aware of it. (I believe that financial aid forms do not ask for any grandparent information.) So, instead of giving X - $500, the college will give the younger Schapiros X, leaving them with an extra $500 to spend how they wish.
Of course, the whole idea that Morty’s children would be eligible for any financial aid in college, given their father’s income, is pretty unlikely. Yet, these sorts of issues can come up in graduate school funding, when parental income is sometimes irrelevant.
In any event, EphBlog readers are encouraged to follow the lead of the senior Schapiros: Keep gifts to your children/grandchildren in your name.
His discomfort comes from his position as president of Williams College in Williamstown, and as a member of the 568 Presidents Group — 28 colleges and universities that are trying to simplify the process of applying for student financial aid. As part of that effort, the group wants to eliminate the need for families to decide whether to keep money for college in the children’s name, the parents’, or the grandparents’.
What a marvelous technocratic delusion! I want to plant roses on Route 2, but my wishes and reality are probably in conflict. Unless and until the nice busy-bodies at 568 start demanding financial forms — tax returns? savings? property listings? — from grandparents, there is no way for them to know how grandparents could contribute. Moreover, even if we achieved Total Information Awareness with regard to grandparental assets, there will always be a way for (smart, privleged) people to beat the system.
And, even if the central planners at 568 could find out every dollar of savings available to the family, there would still be no way to reliably estimate the other side of the balance sheet, the liabilities that we all have. Grandparents with equal wealth often have very different sets of future obligations. Some are healthier, some have more grandchildren. All face a variety of human obligations, invisible to the form-perusers at 568.
And — how long do I need to go on? — even if one could ascertain the assets and liabilities for every set of parents and grandparents in the world, there would still be no way to measure the single most important variable: love. It’s sad but true that some grandparents love their grandchildren more than others and that, even for the same set of grandparents, some grandchildren are favored over others. How will Morty and his friend ever figure that out, determine how much money grandma is really willing to donate to her grand-daughter’s education?
Obviously, they can’t. The central premise — that “need” can be determined from a distance — of a collusive system like the 568 Presidents Group is false.
More ranting on this article another day. Previous similar rants here, here and here.
20 Responses to “ In Whose Name ”
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March 3rd, 2008 at 9:42 pm[...] of the misdirection in contemporary financial aid policy and reporting. Didn’t get enough here? See [...]
September 12th, 2005 at 5:30 pm
David,
Are you suggesting that the goal of the applicant and his/her family is to hide their true assets and try to milk every penny they can from the system/school? As I idealistically look forward to my children applying to school, I plan to be fully forth coming on their assets and let the chips fall where the may. I may end up paying more than someone else with similar assets but I will have a clear conscience.
How about you?
PS - I do plan to exploit the whole legacy from Kansas angle.
September 12th, 2005 at 8:27 pm
I am not recommending lying on financial aid forms, or anywhere else. An Eph lawyer we know might use this quote to draw an analogy to taxes.
In the same way, neither you nor I nor Morty are obligated to arrange our affairs to maximize the amount of money we give to the colleges that are children attend. We need to fill out forms honestly, but, when the choice comes this year in my household whether to stash some money in a 529 or pay down the mortage, we will choose the latter. Money in a 529 decreases, almost dollar for dollar, the grant that my niece and nephews can expect to get from Williams.
I don’t make the rules but I do play by them.
September 13th, 2005 at 4:53 pm
I see where you are going and in general that’s fine. You are making a choice where to put your money. (My wife says the wrong choice.)
But what about the theoretical gift from the grandparent that is given with the specific intention of paying for college? Should the parents request the grandparents keep it in their name? I have no problem keeping the money in the child’s name because its’ sole purpose it to be used to fund education. What would you do?
September 13th, 2005 at 10:02 pm
The truth is better than untruth. Conditional on your child being accepted to a place like Williams, money in the child’s name does not really “pay” for college. It just goes to the college. The cost to your family would be the same if the grandparents had a bonfire of greenbacks and roasted marshmellows.
If grandparents want to transfer money to Williams or make a bonfire, who am I to tell them not to? It’s a free country, as the saying goes. My mission is to make sure they understand the way the world really works.
What do I do? I tell the grandparents to not give money to the children but to spend money on the children, especially on vists to them and trips with them. Our time together will never be long enough.
September 14th, 2005 at 2:35 am
While Dave is correct in stating that he doesn’t make the rules (he only plays by them), from my perspective Brendon has the right side of this argument. A good analogy to the financial aid issue is Medicaid “planning” which allows some persons with assets which could support them to rely on public funds for the same purpose. While it may be legal, in my view if everyone used their own resources to support themselves/pay for college - to the extent they are able - society as a whole is better off, since more people can then “afford” the service.
September 14th, 2005 at 7:32 am
Surely, Whitney, you have a more sophisticated view of society than this sort of collectivized nonsense!
This is probably true, but so are a thousand other things. If everyone (who could) paid for college or volunteered for the military or read to the blind or donated half his salary to charity or . . . society would, I guess, be better off.
But the central organizing principal of a free society is that, while we all may heap praise on those who make sacrifices for others, no one may be coerced into doing so.
Now, of course, Whitney (and Brendon?) are just interested in praising those who dump money into the ever-widening maw of higher education. Fine. Someone has to pony up the cash for Morty’s 400k salary! But I know that neither of you are so taken with this position that you would, fo example, turn down a merit/athletic/whatever scholarship won by you child just because you could afford to pay the full freight.
If there is nothing wrong with accepting a scholarship (even if you are “rich”), then there is nothing wrong with planning your financial affairs in accordance with the (vaguely misleading) rules of college financial aid.
If you disagree with this, then please contact Morty. I know that he would appreciate your feedback! I think that what he and his parents have done is perfectly appropriate. I guess you disagree . . .
September 14th, 2005 at 5:22 pm
I think this issue comes down to being selfish or not.
When I applied for finnancial aid I remember a classmate from high school bragging about how his parents “massaged” their savings, somewhere in the high six figures, so that he could recieve finnancial aid. I find this selfish and greedy. I had friends who applied to non-need blind schools and didn’t get enough aid so they had to go to the state school of NOT their choice.
IMO anyone who can afford to pay for college should. Just like anyone who can afford to pay for healthcare should.
I could do a lot of things that aren’t technically illegal, but that are selfish and that I wouldn’t do. Hiding or manipulating my assests is one of them. Granted I have few assest to manipulate, but still anyone fretting over hiding money so they pay less for college is just trying to keep the rich rich.
My high school civics teacher always said it should be illegal for parents to pay tution, all students should be made to take out huge loans and pay them back with direct deductions from their future paychecks. Sounds pretty fair to me.
By the way, David, what should people do with the money they save by manipulating their finnances to pay less for college; should they buy luxury cars or go on lavish vacations? What is the purpose of saving this money other than greed?
Finally, the boy who’s parents “massaged” their money…no he didn’t get in to Williams, he had to suffer at Midd instead.
September 14th, 2005 at 11:45 pm
Where to start?
1) See our previous discussion about paying your taxes. Unless Shamus coughs up the sales taxes that he avoids when using, say, Amazon, it is a little rich for him to accuse others of being “greedy”. Although his income is much less than, say, Morty’s, he still makes more than more 90% of the people on Earth.
2) What of 529 plans? They allow people to shield money from taxes so that they have more of it. Should “rich” people not be allowed to participate? Even if it is “technically legal,” is it “selfish”? My brother is looking for guidance on the morality of how he saves for the college education for my niece and nephews. Perhaps Shamus can provide some. Using a 529 (or a 401k or an IRA) is certainly “manipulating assets”.
3) Shamus might try to claim that what Morty’s parents do (keep money in their name) is selfish, evil asset manipulation while what my brother does (keep money in a 529) is fine. By what rule does Shamus distinguish between the two, other than his personal preferences?
4) Shamus writes:
I constantly harp on the lack of ideological diversity among Williams professors because I think that this decreases the educational quality of the college. Consider Shamus’s statement another example. Now, Shamus is a smart guy, so the fact that demonstrate such monumental cluelessness is not his fault. He’s just never had a professor who said something like:
Now, that is a little harsher than I really want it to be, but it is sad and pathetic (and Williams’ fault) that Shamus has obviously never been confronted with sophisticated challenges to his worldview. Every poor person on Earth can ask Shamus — he of the sensible car and reasonable vacations — “What is the purpose . . . this money other than greed?”
What is the purpose, Shamus?
September 15th, 2005 at 12:30 am
David,
The conservative tells the liberal to “think of the poor”. Now, admittedly, Shamus may have been somewhat lazy in his post, but his point is not invalid. (also, what if Shamus lives in Manhattan. Then he won’t drive a car at all in all likelihood!)
The point is not to say “this is the worst tax/economic inequality in the world” as you seem to assert by comparing it to all others in the world instead of to the individual’s other reasonable possibilities. Though I share your desire for us to focus more of our thoughts on the poor instead othe shrinking and somewhat mythical “middle class” and that this focus on the poor should extend beyond the relatively privileged poor (in this case, those driving a Hyundai and not taking vacations instead of the $1 a day poor). However, this does not invalidate all arguments that do not address this more extended sense of community.
The argument Shamus presents, which I am somewhat ambivalent about myself, seems to be that many aspects of our tax code…and in this case, financial aid system, allow for people with the means and knowledge to use the letter of the system to pay a disproportionately lower amount of taxes (assuming you believe our progressive tax system is “correct”. For now, let’s take that as a given).
This is the classic “spirit of the law vs. letter of the law” argument. In an ideal world, tax shelters and things like that generally would be so well defined as to only be useful when intended to be so. That is not true right now. This is one case of that. However, I find it too simplistic to just ask other “please don’t use this accidental shelter”, and thus believe grandparents should do what they can to shelter their money whenever possible. That said, I also find it far too fatalistic to say “well, the system is broke (or maybe it isn’t) and it ain’t going to get much better” as you seem to be arguing in the original post.
To take amazon as an example, our government has been talking quite a lot about how to tax Internet sales and its benefits and negatives. It’d be nice if government and such actually did their jobs efficiently and thus such debates were resolved instead of tabled ad nauseum. But that’s not true at all.
So instead, here’s my final thought. Your grandparents have the right to shield their assets if they so choose, yet have little right to complain when an effort to deceive, however legally (and this would be deemed a deceiving mechanism), others of their relative wealth is exposed and systems are changed to adapt to stop such deception. In this case, we’ll never find perfection (until we fundamentally change our system of paying for college to make it a more logically communitarian effort instead of our half-baked psuedo-progressive, psuedo-individualized system, if we so choose), but I fault no one for following the rules or trying to change them.
I have no idea if this is clear or not. but its time to start back on the sociology reading before hitting WIlliamstown one more time this fall. (on a side note, I’m absolutely floored by how well prepared I am for much of grad school’s workload. it’s like williams actually did what it claimed it would for me academically. nice!)
September 15th, 2005 at 9:37 am
I am not sure I understand your argument, but I have just a couple of comments:
“Right now”? It will never be true in a free society. There is simply no way, without crushing levels of coercion, to use the tax system to force people to allocate resources the way that you and Shamus want them to. Of course, on the margin, you can have an affect. The existence of 401-Ks does lead people to save more. But there is just no way to force Morty’s grandparents to spend their money on their grandchildren in the manner that you prefer.
Now, once we agree that force won’t do much in this regard, we might argue about what sort of moral judgments we might make in this regard and what sort of moral arguments we might use to convince Morty’s grandparents to act differently. Fine. I am ready to argue over this. But virtually any moral arguments that you might make about why anyone richer than you or Shamus should do X, or easily turned back so that people like you and Shamus (rich in almost any other context) should do the equivalent.
It would be nice if the sky was always blue in Williamstown. Alas, it is not. And unless you have some magic potion that will make “government” more efficient, you should come to grips with the fact that, irrespective of the party in power, government will always have its flaws.
“Shield their assets” is a revealing way to phrase things. Morty’s grandparents of have X dollars. It is none of your damned business what X is. It is none of Tiffany’s business what X is. It is none of Williams business what X is. It is their money. Why is this so hard to understand?
Now, you might want to know what X is. Gossip is fun. Tiffany would like to know what X is. (The more that a business know about their customers, the better off that business is.) Williams would like to know what X is. But, just because you or Tiffany or Williams wants to know something, does not mean that you have the right to know it. Nor does it mean that Morty’s grandparents are shielding anything.
By the way, you’re going to graduate school in sociology? I did not know this. Have fun! And learn serious statistics. The future of the social sciences belongs to the quants.
September 15th, 2005 at 11:20 am
This thread has gone places that I never would have suspected but Dave you did not answer my question from several posts ago - If the grandparents wanted to give money specifically for the grandchild’s education, would you tell them to keep it in their own names or would you put it in the child’s name?
You deflected the question originally with a blatant attempt to suck up to Eph Blog reading grandparents, “I tell the grandparents to not give money to the children but to spend money on the children.” (Who says conservatives do not have a soft side?) But this is a theorectical gift and the assumption is that despite your pleas for more quality time and your detailed explanation of how putting the money in the grand kids names is like throwing it in a bon fire, they have still decided to give a gift specifically for education but they have left it to you to decide whose name to put the money in. Whose name would you put in with this scenario?
I’ll admit this is a tight construct but this is the question I pose. Would you disclose this asset to the college?
September 15th, 2005 at 1:24 pm
Brendon asks:
I would tell them the truth. I would explain how financial aid policies work, how need is calculated, and why sophisticaed people like Morty’s grandparents often keep their gifts in their own names. I would also point out that their notion of “education” is probably broader than what the government might conceive. (Does travel count? Does start-up capital for a business?)
The key point is that money given in a child’s name (conditional on the child getting into a place like Williams) does not actually reduce the out-of-pocket expenses for that child and her parents of going to college. In that sense, the gift is more symbolic than real; it demonstrates the grandparents’ love (they give up real dollars) while not financially benefitting the child or her family. They could just as easily demonstrate that love by burning the money.
I suspect that, if more grandparents knew the truth, more would act as Morty’s parents have.
September 15th, 2005 at 1:49 pm
And here, to add more unexpected things to this, David, we basically agree.
You, in your realist type of logic (lovable in a way…) say, my idealism is never achievable and thus nice but should not affect anything. I, acknowledging that my desire for a tax code and financial system that wasn’t used in ways that it was not intended to be used is an impossibility, still use this impossibility to construct my morality in terms of what should be done and expected of individual agents within the real world.
So yes, Williams can’t find out a grandparent’s money, nor can I expect government to fix all its flaws. All I ask is that when someone points out a flaw (in this case, possibly, the grandparent funding of education), those who are manipulating the flaw instead of coming up with defenses for it, say “yep, and if you fix it, such is life. And if you don’t, I’m gonna keep using it.”
But that’s as impossible as an efficient government.
And I just got out of stats class a couple minutes ago. Though I don’t know how quant. I’ll go. We’ll see.
September 15th, 2005 at 11:07 pm
Well there is always the question of whether to respond knowing that David is unlikely to change his opinion and I’m almost as unlikely to change mine…but I enjoy a good strong headed argument so I’ll bite.
“Where to start?”
David that sounds a little mean, but some children called me Jim Carrey(and meant it as some kind of insult) yesterday and my feelings didn’t get hurt then, so I guess I must be too tough for that.
“1) See our previous discussion about paying your taxes. Unless Shamus coughs up the sales taxes that he avoids when using, say, Amazon, it is a little rich for him to accuse others of being “greedy”. Although his income is much less than, say, Morty’s, he still makes more than more 90% of the people on Earth.”
We can compare the percentage of our salaries we give to non-profits or charities, who does more community service each year etc…but I can call anyone greedy if I want to…did I say I wasn’t greedy? I am, but so are you David and a spade is a spade.
If you think I am high and mighty I’m not. I can see what is wrong in my own life. So I spent 500 bucks of my own on books for my class last year; I also spent significantly more than that on buying my family and friends presents…did my kids read less because they had less choice…yes…am I proud of this…no.
“2) What of 529 plans? They allow people to shield money from taxes so that they have more of it. Should “rich” people not be allowed to participate? Even if it is “technically legal,” is it “selfish”? My brother is looking for guidance on the morality of how he saves for the college education for my niece and nephews. Perhaps Shamus can provide some. Using a 529 (or a 401k or an IRA) is certainly “manipulating assets”.”
My main concern is not tax shelters…it is scamming finnacial aid. I’ve seen people unable to afford college and it saddens me. That is my main gripe here, buy all you want on amazon. I only care about manipulating finnance when it comes to college. Also as someone else said, the tax code should be simple and straight forward, all these loopholes for the “in the know” should not exsist.
“3) Shamus might try to claim that what Morty’s parents do (keep money in their name) is selfish, evil asset manipulation while what my brother does (keep money in a 529) is fine. By what rule does Shamus distinguish between the two, other than his personal preferences?”
I only care about it when it comes to college.
“4) Shamus writes:
By the way, David, what should people do with the money they save by manipulating their finnances to pay less for college; should they buy luxury cars or go on lavish vacations? What is the purpose of saving this money other than greed?
I constantly harp on the lack of ideological diversity among Williams professors because I think that this decreases the educational quality of the college. Consider Shamus’s statement another example. Now, Shamus is a smart guy, so the fact that demonstrate such monumental cluelessness is not his fault. He’s just never had a professor who said something like:
Get a grip. You talk of “luxury cars.” Don’t you see that most of the people in the world don’t even have a car, much less a luxury one? You talk of “lavish vacations.” Don’t you know that most people outside the developped world take almost no vacations, lavish or otherwise. By the time you are 30 — no matter what your profession — you will be driving a fancier car or taking nicer vacations than 90% (at least) of your fellow humans.”
And what is your point? I know this David, I’ve seen it, I’ve lived in it. I’ve lived in Rio, South Africa, India. I’ve lived with people who live off 5 or six dollars a day(sorry never made it to the dollar a day or less of some parts.) Did I feel guilty then, yes, did I think I was selfish? Yes. Have I seen it up close and lived it, yes. Have you David or did you read about it somewhere? I’ll assume you have even though you didn’t give me the benefit of the doubt and figured I was unaware of the rest of the world outside the US.
Now, there is nothing wrong with the “greed” that you demonstrate by insisting on keeping the money you earn and spending some of it on cars and vacations. Such is the way of the world. But don’t pretend like any reasonable moral scheme allows you your cars/vacations while denigrating those of others.
Yes it does, every dollar I spend on myself could make someone else’s life better.
“Now, that is a little harsher than I really want it to be, but it is sad and pathetic (and Williams’ fault) that Shamus has obviously never been confronted with sophisticated challenges to his worldview. Every poor person on Earth can ask Shamus — he of the sensible car and reasonable vacations — “What is the purpose . . . this money other than greed?”
What is the purpose, Shamus?”
They can ask me and I can tell them I am a selfish, materialistic asshole. I can look in the mirror. And obviously I’ve had my worldview challenged, I’ve spoken with my dear friend Aidan on many occasions. Please don’t act out some educational pity on my behalf. I couldn’t have gotten a better education anywhere else…I don’t think I ever got a williams prof to agree with me and that is what I loved about it. They always made you think about it in a different way.
Oh and the purpose of the money is to help others less fortunate than yourself and still enjoy your own life. The question is where do you draw your line? What percentage of your salary should go to helping others…I don’t know. I think it is what you can live with…and most of us, myself included, could stand to give a little more.
And yes David your post sounds harsh and antagonistic…but like I said as long as you don’t threaten to “smack the shit out of me” like some 18 yr old gentlemen have, I’m tough, I can take it. But if you’d like to sound less harsh you could not generalize about me and not take a condescending tone. You could also not use my name over and over because studies have shown that is a way to aggrevate people. I’m used to your style and no longer take offense, but remember a number of people have been driven away or nearly driven away by some of your responses. Then again everyone I’ve gotten in nasty fights with on the internet has been quite nice in person and I’ve even become friends with some of them…weird
And just to clarify this was not a nasty fight, it could just have a little less attitude.
September 16th, 2005 at 12:30 am
Please notify me in writing of the identity of all parties to whom I should submit, for advance approval, a description of my proposed financial decisions. At any rate may I have an expedited assent to my purchase of breakfast tomorrow morning at Pappa Charlie’s? I promise to keep the bill under $10 and will leave a generous tip in order to facilitate a redistribution of resources to the deserving.
September 16th, 2005 at 8:06 am
I apologize to Shamus for the tone of my last couple of posts. Although it is no excuse, I blame the pressures of little girls soccer coaching.
I guess that the crux of our disagreement concerns what “scamming financial aid” consists of. I insist that it is not “scamming” to consider the consequences of the choices one makes as one input in the decision-making process, just as it is not “scamming” the state government to order through Amazon.
I agree with this sentiment:
I don’t know what percentage of your salary should go to helping others. I also don’t know what percentage of Morty’s parents’ (or Frank Uible’s) wealth “should” go to them or to their grandchildren or to the government or to the college that their grandchildren attend.
But I hate it when other people claim to know, when they insist that the (legal, ethical) choices made by their fellow citizens are “greedy”. Now I do concur that, as Shamus notes, we are all sinners. If his claim is that the Schapiro family is “greedy” and he is “greedy” and I am “greedy,” then fine. But the claim seemed to be the Schapiro’s are especially greedy because, unlike he, they would spend the money that they save on fancy cars and vacations.
I will brook no insults to the Shapiros! ;-)
September 16th, 2005 at 9:39 pm
You guys may want to acknowledge your greed, but of course it is manifest that I am not.
September 16th, 2005 at 9:53 pm
Greedy - that is.
September 16th, 2005 at 11:42 pm
David, I am all for 100% of Frank Uible’s wealth going to his grandchildren or the school that those grandchildren attend which might be Williams if he has a say. As for little girls soccer coaching, you obviously aren’t coaching his granddaughters much less his grandsons!!!