The financial aid site clarifies the definition of typical assets. Seems like families with under $300K qualify, excluding retirement accounts and primary residence home equity beyond 1.2 times annual income. As others have mentioned, it's designed to prevent families who have large savings from manufacturing an artificially low income (an extreme case is retiring early for a few years to show no income).

The takeaway is, maxing out retirement accounts like a 401k and dumping savings into paying off the primary residence mortgage are ways to accumulate net worth without accumulating "above-typical" assets.

http://financialaid.stanford.edu/site/faq/index.html#faq_20 ===========

What do you mean by "typical assets"?

For applicants who report total annual parent income up to $125,000, we generally consider "typical assets" to be an adjusted total net worth of less than $300,000. Adjusted total net worth usually reflects the sum of the following amounts:

Cash, savings, checking Investments Home equity, capped at 1.2 times annual income Equity in real estate other than the home Business net worth

We do not include formal retirement assets (401k, 403b, IRA, Keogh) in our analysis.