A client recently requested my assistance in completing the FAFSA application. The husband had told me that he has a very large portfolio of marketable securities. When I sent him a request for the list of family assets, he didn't include the investment portfolio. Puzzled, I asked why. He referred me to an Education Assistance Consultant he'd hired who advised him to form a single member LLC and title the investment account to the LLC. According to the consultant, this qualified the portfolio for exclusion from reporting because the LLC met the U.S. Department of Education's definition of a small family business. To wit, a more than 50% controlled activity with fewer than 100 employees. Period.

 

I called the U.S. Department of Education and after 5 or 6 attempts got a number for the office that will discuss "Federal Student Aid Policy and Law". The supervisor that I spoke with read the definition of a business to me and said that she would have to conclude that the "experts" advice is correct.I shared my lack of appreciation for such a weak definition that it didn't exclude any activity wrapped in a corporate entity.

I pointed out that the lack of effort and insight being demonstrated by the Department is resulting in the unfair allocation of resources to those who are interested in subverting the system, and for those who would take advantage of the Department's ineptitude to attract and retain clients. She agreed and said she'd push the issue up through the heirarchy. I posted my opinion on the Secretary Arne Duncan's Facebook page. This morning, I checked and learned that the post has been removed, presumably by the Department of Education.

Wow