Hacker News

From what I've observed (worked at a few small businesses before I got an office IT job, and even then...) it's about figuring out enough 'fringe benefits' and/or 'explanations' that are plausible with your CPA. e.x. how many profitable company car buy/leases can you do, a good explanation of why you are saving that money as a small or privately owned company (i.e. saving for expansion via acquisition/etc, but you have to follow through and then sell the results ASAP)

You can't have it be 'insignificant' salary but you can do plenty of fringe benefits or long term profiteering via acquisition as mentioned.

I will say, ironically, the small business owners like that were great to work for, although they were paranoid, they were often generous to employees.

OTOH, at the computer shop there was a standing rule that if the CPA brought his computer in it was 100% priority and we treated him better than the one org that was 10-30% (depending on year) of our entire gross income...

EDIT: To be clear, it's complicated, https://news.ycombinator.com/item?id=42199534 is a good explanation of where I sit overall.

My understanding is that the IRS attitude toward this depends on the exact tax status of your small business. The approach you describe reflects an S corporation, which is nowhere near always the right choice for every small business that sends their children to MIT: as one counterexample, if the parents' business is in NYC, the city's General Corporation Tax (which applies to S corporations) is often more punishing than its Unincorporated Business Tax, and therefore many NYC small businesses organize as LLCs not taxed as a corporation if they even choose to create a separate legal entity at all.

For every type of business entity other than an S corp or an LLC electing to be taxed as one, the IRS either doesn't care about any notion of reasonable salary or - in the case of a C corp or an LLC electing to be taxed as one - actually wants it to be as low as possible (whereas the owner wants to maximize it).

Are you saying that the IRS will literally officially modify your recorded / reported income and expenses to be different from what you reported, at their discretion, even if based on what they think are plausible reasons?

That still seems like heavy handed overreach to me. Should they not instead contact you for clarifications about the ambiguity?

> the IRS will be up my backside pretty quick

How many times were you audited before learning this valuable lesson?

As a former owner of a small business I can tell you that what my accountant told me about that is that as long as the salary is over the Social Security max, (which is about $160K) the IRS doesn't really care.

Will they actually though?

You hear a lot of anecdotes both ways and it is quite hard to get a good picture of the real situation.

> most people don’t plan like this.

This is a pretty naive take. It is a $85k per year cost. If you can shift some money around and avoid $85k per year, you would absolutely do that.

> you could also emancipate your 17 year old.

This is complicated. Emancipation is not a “sign a form” kind of thing. The kid would have to be living completely independently (no support from the parents) and would have to convince a judge that they need to have rights and responsibilities otherwise given to adults. “Because the parents don’t want to pay for school” isn’t really a valid reason.

IF I have stock and make $XX,XXX in dividends, how is that different? IF I have own apartments and make $XX,XXX in rent, how is that different?

I think the idea is that Yes, the expectation is for people to make actual sacrifice before they qualify.

A bunch of stock is a source of income too, but it wouldn't be wrong to use some of it.

If the business is worth enough then selling it can replace all the income you would have ever gotten from it. It's not as simple as "income goes away". The specific numbers make all the difference.

Does MIT include the market value of their kidneys in their assessment? You might have lost track of what is being discussed here.

Anyway no, they should not cut their kidneys out and sell them.

Nobody is forcing them to pay this price any more than you are forced to sell a kidney for a private jet.

Education costs are out of control, but you can still get a degree elsewhere for 10% the MIT cost, and have it paid for entirely by the government if you are low income

European colleges are incredibly thrifty, though. German universities for example can lack dorms, student unions, and professors lack TAs to grade homework (so homework isn't graded) and your entire grade depends on one final.

We could do this in the USA also, or perhaps even bother with online universities, except those are generally considered not very useful as degrees.

It isn't solely the government's fault. Most American universities are corporatized and exist primarily as money printers for the admin staff. The purpose of an adjunct professor is to cost the institution as little as possible while passing as many marginal students as possible so they can maximize profits with sheep that keep coming back to the trough.

This is a common myth. This might explain why Harvard or MIT tuition is high but not the average college. Tuition mostly reflects staff costs and those have been going up due to Baumol's cost disease. Dentists, along with many other industries with its main cost being highly educated staff that haven't managed to scale production like online brokerages, have had a similar price increase since 1970.

> If you go back in time just a few decades, this is how it was: you paid for it, either in cash or with a PRIVATE loan, and people didn't see college as an automatic requirement. Then it was 1/10th as expensive.

...if you go back in time a few decades basically everything was about 1/10th as expensive.

e.g. "Adjusted for inflation, $1.00 in 1960 is equal to $10.43 in 2024" according to https://www.dollartimes.com/inflation/inflation.php?amount=1...

Still, I do not get it. Why would this competition / exclusivity rule be so much less prevalent in large parts of Europe?

I don't want to say Europe is without problems, but I think this kind of legislation, together with social security in general, is a clear example of how it can be handled more efficient and fair for most people.

> universities primarily compete on entertainment and prestige.

I like to call this "resort-style education".

actually ETHZ and EPFL are very good and highly ranked, and have cheap tuition and open enrollment. i don’t know how they do it. I guess things just work better in Switzerland.

I don't know where the OP lives. But in Switzerland, where world-class univeristies like the ETH cost something like $ 1.5k a year in tuition, I'm pretty certain that people earn more on average than in the USA.

Yeah indeed a giant part (75 percent or so) of what the companies pay, does not directly go to the workers bank account.

A few weeks ago apparently, the 'promise less taxes->everybody happy' magic spell has once again worked.

> the ideal is that college should be very expensive for rich people and cheap, free, or at least more affordable, for less wealthy people. american universities get closer to this ideal than you might expect. the days of outrageous student debt are thankfully fading away, at least for undergraduate degrees.

this is partly true. it is cheap / free for very low income -- if you qualify for a Pell grant you can usually get additional financial aid from your state university that can bring your cost down to zero.

But if you are above the low income line, but by no means wealthy -- so if you're a household making say $100K a year, then college is extremely expensive and unaffordable especially if you have several kids. You're not poor enough to qualify for substantial financial aid, and you're not wealthy enough to afford tuition. Yeah, your kid can get into Harvard or Stanford for free, but the chances of them being accepted are vanishingly small no matter how smart they are.

The saving grace is community college -- enroll at the local CC for 2 years and then transfer to the state school.

Why should college be very expensive for rich people?

    > the ideal is that college should be very expensive for rich people and cheap, free, or at least more affordable, for less wealthy people.

the ideal is that college should be very expensive for rich people and cheap, free, or at least more affordable, for less wealthy people.

Dunno where you got this "ideal".

the days of outrageous student debt are thankfully fading away

..."fading away", to the tune of (at last glance ) one and three quarters of a trillion dollars in outstanding student loan debt.

it would make more sense to do this redistribution through taxes if possible

The ability of US higher ed to raise tuition prices will always overwhelm the ability of US taxpayers to meet those prices. The phrase "utility monster" comes to mind.

but many US institutions are private so that doesn’t really work.

Private, in the sense that nobody who answers to someone who must win an election is directly in charge of running them, but, who operate as charities for the purpose of donations, pay no taxes on either capital gains or real estate, and are permitted to act as government contractors skimming up to 85% of grant money they're tasked with administrating.

so the colleges basically have their own privately-run means testing programs, and like all such programs there are flaws and loopholes.

The flaw being that...the school is allowed to have total knowledge of a customer's ability to pay before it chooses to do business with them. Imagine if you had to give three years of your tax returns to the person you were trying to buy a house from.

The cheapest you're going to get is $10K a year (and that's hard to find), and that's just tuition. If it's not near your parents' home then you're looking at $25K/year bare minimum (as in living off ramen packs and peanut butter). So that's $100K that your parents have to have saved up (per child) or which you have to take on as debt.

Just looked up our main state schools and cost of attendance is $31K - $35K for in-state residents. So that's $120K - $140K for 4 years (not counting increases). And these aren't top-100 schools either.

Even the cheaper schools in the US (public universities) aren't all that cheap anymore. When was an undergrad in the late 1980s, I paid under $2000 a semester. Now it is close to $10000. Yes, there's been inflation since then, but not 5X (it's more like 2.5X).

I will say though, that pretending there isn't a difference in education is just untrue sadly. I've had to come to terms with this, going from a very small state college to a more prestigious private school for graduate studies. Nearly everyone around me is from a large, more expensive school, literally everyone else in my program is significantly better educated than me. Of course you can find good programs at small schools, they try very hard. But there's just a difference between a school that can afford to run classical mechanics 2 and one that cannot, a school that can afford to pick and choose a good professor for their classes and one that cannot. And that gap is vastly wider than i had imagined

Funnily enough, if you think about for networking you'd much rather be surrounded by kids who can afford that 200k price tag upfront.

I really think Freedom, the American way, is super overrated. If the cost is misery, fear of loss of health or job, what's left of Its benefits? "I'm the chosen one protected by God"? Or does social security still have this huge connotation with communism?

Sorry for my ranting, I just cannot believe what is still happening.

30 minutes does not seem too bad. Unless you paid a lot for the dorm.

How so? I know a guy who has literally millions of dollars tied up in shit that moves dirt and rocks and another mil tied up in some gravel pits.

The free cash he has, the house he lives in, the lifestyle he can afford is on par with "normal" white collar professionals (i.e. not people who get a bajillion monopoly bucks to implement linked list traversals for faang). He works 60hr weeks during construction season and has government agencies up his ass regularly (MHSA regulates him like he's running a pit mine, it's a huge f-ing farce). If you don't place insane value on being your own boss it's kind of a shitty life.

Because it is really a discount to the parents, not the student. It is understood that few 17 year olds have saved enough money to pay MIT's tuition of $85k/year for 4 years and parents are usually footing the bill.

Yes, students who's parents have money but choose not to spend it get a rough deal. You can make a pretty strong case that it is their parents screwing them over, not the school. The school doesn't owe a discount to prospective students.

In my opinion, you're reasoning about it incorrectly.

What if I said: the price is the same for everyone, but people with less access to money get proportionally more assistance paying that price?

At an upper end college? Yeah I guess it has to be like definitely below 90% of the population. Basically zero!

I don’t see it like that. People bragging about getting into MIT but not being able to go for some reason is an old meme, it always turns out that they didn’t really get in.

I doubt they could even if they wanted to. All problems cannot be solved by throwing money at them, and the local governments may not be cooperative or efficient enough to use the money. There are chemically engineered drugs that will gigafry your brain into addiction in one dose getting better every day. Police departments all over the country/west seem to be ineffective at enforcing order, courts are too delayed and too lenient on sentencing, list goes on. Problems on the public side that private enterprise can't really fix without a lot of cooperation. Maybe in a much less regulated world like the Carnegie's, they would be able to try a lot of things without permission, now it would take years of begging to get a permit to build a drug rehab centre somewhere no matter how rich you are and the neighbors would block it.

> That’s why the Carnegies and Mellons built libraries, museums, and the very literally named Carnegie-Mellon university, back then. Now it seems like the first thing billionaires today do is isolate themselves and their wealth from the masses as much as possible.

Historically speaking, wealth accumulation was borderline impossible because the incentive to steal it was so large. You had to become a king, and then constantly murder people trying to take the throne, because everyone had the attitude that the only way to acquire wealth was to steal it from others. And that never really worked out well since the king was always threatened by death (the Sword of Damocles).

This stopped when the upper classes realized it was cheaper and more effective to raise the living standard of everyone else than it is to prevent everyone else from stealing their wealth. When you create wealth, you share some of it with others.

In other words, create a society where everyone has salt and pepper, rather than try to hoard salt/pepper for financial gain.

That's true of schooling as well. In the Middle Ages, only the rich and powerful could read and write. Now that everyone knows how to read, Facebook has a trillion-dollar business selling words.

This mentality is present in FOSS to some extent, but it isn't present for education anymore. Everyone seems to think good universities are a perpetually limited good, so we fight over limited admissions spots rather than figure out a way to deliver high quality education to the masses.

It's stupid, because bumping up the difficulty is how we make education worthwhile.

> UPenn is a land-grant institution

The University of Pennsylvania is one of the nine colonial colleges founded before the United States existed. It predates land grant institutions by over a century. I think you are confusing it with Pennsylvania State University, which is a land grant institution.

Wow an actual topic on HN that I know about. I spent 3.5 years studying the history of UPenn - including writing my thesis in its history - and it is definitely not a land grant university.

> UPenn is a land-grant institution

It isn't.

Despite the name, it's actually a private university.

Penn State is Pennsylvania's land grant university.

> They were given land and money specifically to serve the public good.

Their duty is to deliver education. It's not solving political problems meant for elected officials (and the population at large).

If they are like most other schools with a low income neighborhood nearby, they probably offer an entire k-12 education sequence for these kids ran under their education major’s department. Likewise their hospital probably treats low income people in the community. And of course the school itself is a massive jobs program for low income people in the area as well, who might qualify for reduced or no cost tuition for themselves or their kids.

You're asking the wrong question: why would they?

How much have you contributed to Philly's woes?

Probably nothing, because it doesn't benefit you.

It is the government's responsibility. Change your government with votes.

OK, but they do exist to educate people, and have a comically large endowment to do it with that only keeps growing. I guess their plan is to grow the endowment until all human beings everywhere can get full ride UPenn scholarships?

> Withholding grants from greedy schools is one option

At that point, stop writing grants. Sending money to sub-optimal grantees to effect an education/investment policy is wasteful.

> purpose of the university is ostensibly to provide an education

One of the purposes. They’re also centres for learning and research and repositories of knowledge.

Households with earners in their 20's and early 30's don't tend to have a lot of children of university age. One would want to use the median income of households with university-aged children.

(Median income by age rises sharply from 20->40, then flatlines... the median age of a mother is around 27?)

The population of people who apply to a nice college, or even college at all, is probably not representative of the average american household

The article actually goes into more detail:

> Last year, the median annual cost paid by an MIT undergraduate receiving financial aid was $12,938 , allowing 87 percent of students in the Class of 2024 to graduate debt-free. Those who did borrow graduated with median debt of $14,844.

just a guess, but upfront money needs to come from somewhere, presumably everyone else that is working, including vocations.

jobs that pay well are a signal that there is high demand for this skill in our society and that more people need to develops these skills.

Why would we not want universities to respond to that signal?

Programs like Stars College Network (https://starscollegenetwork.org/) and Questbridge (https://www.questbridge.org/) help to bridge this gap in knowledge. They are really good programs, based on my limited to exposure to them as a Caltech alumnus. It was an incredible stroke of luck that I knew Caltech even existed growing up in a very small town pre-Internet, and these programs take some of that luck out of the equation.

Good point. Kids of poorer school districts still have the prestigious admissions system stacked against them, in many ways, but simply knowing that Ivy/MIT/Stanford/etc. may be options will lead some to look into it, and some will then have information, time, and means to make their application look plausible.

As a young teen, I applied for financial aid, to a state school, and got a nonviable response, since my parents of 6 kids could afford to contribute zero, but some bureaucracy thought otherwise.

So I went to Community College part time, while working at a store, and then was a co-op student, and worked my way up from there. After working in industry, I went to grad school, at an Ivy and MIT, and only then did I learn what successful undergrad applications tend to look like, and also that there's various financial assistance available (including some not advertised).

My story is not of the system working. I've seen so much systemic class nonsense and rigging (and sometimes bad behavior by people who feel entitled to whatever they can grab). Being at a disadvantage in those games doesn't stop once you're nominally in. But the relatively recent need-blind admissions, and family income thresholds for tuition, help a lot, especially if we can pair that with getting the information/advising about successful applications to everyone.

For most taxes you expect higher earners to pay more but this is not the case with student loans because high earners pay of their loans quickly whereas lower earners end up paying far more in interest.

An actual graduate tax would be far less regressive than the current system

Australia does something similar (it's called HECS if you want to search for details).

I think they are suggesting that you would graduate debt free for having done service while getting your education

The university’s would argue that the students voted with their feet, and that those facilities are an arms race that if you lose you lose students.

I do t know that they are disinterested parties in this that can be trusted uncritically but there is a community college near me that has nicer gym facilities for their students than my big 10 Alma matter had for its “student” athletes when I was in school. Something drives that.

I was going to comment that free loans and inefficient/outsized admin go hand-in-hand. On further thinking if you take away the loans, the admin has no choice but to shrink and achieve higher efficiencies.

SF is already one of the most dense cities in the USA. If the government forbids people from building housing, they've historically done a poor job at it. They are the second most dense city in the USA after NYC, and no would accuse NYC of not being unaffordable either.

The real problem is that more people want to live in SF than they have allowed housing to be built for. But it isn't clear that if they went with Houston-style "anything goes", would they still be that desirable? Or only as desirable as less popular Houston?

Yep. I just got done reading The Meritocracy Trap and the gist of it is that wealthy kids already have tons of educational resources thrown at them to get into good high schools, colleges, and careers. So they don’t also need financial advantages and legacy admissions.

This doesn’t solve all of those problems but it’s a start.

Two people with the same GPA and same piece of paper from the same college, may have gotten different amounts of lasting value from their college experience.