A simple guide to getting the most out of college financial aid:

1. Spend as much of your household income as possible. Buy that new TV. Make sure you have the latest iPhone. Go out to eat for every meal. Don’t forget to spruce up your current place of residence (see #2).
2. Show that your family has no assets when filling out the financial aid profile (the value of the home in which you live is not included in the calculation).
3. Seeing that you have no savings to pay for college, the government and/or college will be happy to pay large sums of money for your education.
4. Profit.

This plan is excellent because your family gets to 1) live life in the moment and splurge on every purchase and 2) pay less for college. Of course this guide isn’t perfect, and I do not actually suggest such frivolous spending. Choosing the best balance between saving money (for things such as emergencies, retirement, investment, etc.) and lacking assets (to receive more generous financial aid) is much more complex. However, in the world of college financial aid, one thing is clear:

Parents who save for their child’s college education are unjustly punished for doing so.

Quite ironic, isn’t it? In my childhood, my parents always stressed the importance of saving money and resisting the urge of impulse shopping. Saving money that could grant you the newest phone, the coolest gadget, or even a delectable dining experience at a moment’s notice is not a painless task. Being frugal can be difficult for many Americans since, unless a household lives completely paycheck to paycheck, it will always have some amount of income left over that is available to spend. Thus, many families are subject to the pull of nonessential purchases and the instant gratification of such spending. It should be in the best interest for colleges or the government (more specifically, the office of Federal Student Aid running FAFSA) to encourage families to save money, yet that is simply not the case.

Suppose there are two identical students in identical families attending college with identical household incomes*. However, one family has $30,000 in savings/assets while the other has $100,000. The Expected Family Contribution (EFC) of the first family is $7,770 per year. The EFC of the second family comes out to a total of $11,550 a year. In another case, if the family manages to save $200,000 in assets, the parents are expected to contribute more than twice as much as the first family, with an EFC of $17,190. In this scenario, there exists only a difference of lifestyle. Those who are frugal must pay the price when colleges find their assets.

The problem in the methodology behind awarding financial aid is that the government and universities are simply unable to distinguish how a household spends its money—whether the family saves or spends its income as it is earned. In these financial aid calculators, the government or university only sees the income and assets at the moment a student applies; they have no clue how the family spent its money over the last several years.

This leads to a possible solution to the problem: requiring families to submit a financial history, including all unforeseen medical expensive, job losses, and other factors that may have affected household spending in the past. This would allow colleges and the government to paint a better picture of a family’s financial behavior and end the discrimination towards responsible parents who save money. Nevertheless, the likelihood of such a resolution is slim. Expecting all families to know, with any sort of accuracy, their financial history for the last 5 or ten years is foolish. Yet, universities and the government could take steps in the right direction by placing more weight on family income rather than savings when calculating financial aid.

Being frugal is a series of responsible choices and sacrifices; savings don’t wind up in your bank account by accident. Families can choose to be prudent with their money, and it is cruel to punish these savers.

*In this example, I used this financial aid calculator. I inputted a household income of $80,000 split evenly between 50-year-old married parents with 3 kids living in Colorado. In this case, the child made no income and had no savings, in order to isolate the parents’ EFC.