US News is reporting on a loophole in the federal financial aid rules passed last year that will provides that the government will not consider the assets of owners of small businesses with fewer than 100 employees. I understand that rational behind the law but I think that it is too broad in scope and should be narrowed. There is a difference between a small business with 5 employees and one with 95. Further to ignore the assets of the business entirely is to ignore the reality that some small businesses will use this exemption as a way to convert income into protected assets. It would make more sense to say that for small businesses, however defined, that assets below a certain level will be excluded. Of course some businesses have more need for capital investments than others but this still seems like a fairer approach.
With the limited resources that the government has to contribute to financial aid, this loophole does not seem to pass the fairness test that should be used to make sure that the neediest students receive the greatest financial aid.
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