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It's not odd. Assets can be sold for income.

We're just not used to thinking about it that way because, in terms of taxes, assets always get special treatment because the ultra wealthy hold the majority of their wealth through assets instead of income. And so, we do as they wish.

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It’s specifically odd here because it’s pretty reasonable to say that retirements savings (which initially came from income) shouldn’t factor into a family’s expected contribution to a child’s college education, for the same reason it would be odd to double tax income and then the assets that you buy with the income.

Retirement savings are in fact excluded from parents' assets for the purposes of FAFSA, at least if they are in some kind of account legally recognized as a retirement account (401k, 403b, IRA, traditional pension, annuity, etc.). Details of what is included and excluded from parental assets: https://studentaid.gov/2324/help/parent-investments

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