Even then, 1 year off is a 20% income reduction on paper. 2 years would be 40%. Want to catch people voluntarily taking off work versus being 'legitimately' unemployed? (For example, is a realtor with no income during the housing crisis adequately poor?) Then, every university will have to hire people to do the analyses and make value judgements.

Long term, factoring in wealth creates all sorts of perverse incentives for parents that prioritize their children's education. It means in the present not taking promotions, even negotiating for lower salaries, and being priced out of better neighborhoods with better schools, all out of fear that doing otherwise will hurt their children's futures. And if their children succeed in getting a good education and a high-paying job, it comes at the cost of sacrificing their own children's futures.

Can’t this be taken into account by also considering wealth and assets, rather than by only income?

FAFSA seems to have been updated in recent years to evaluate not only income, but also wealth[1] (minus retirement accounts), including most types of US trusts[2].

[1] https://studentaid.gov/help-center/answers/article/fafsa-que...

[2] https://mcandrewslaw.com/publications-and-presentations/arti...

You'll also get people claiming estrangement from their parents.

It's like one of those AI algorithms that play games, if you don't plug all the holes, the AI figures out how to bunny hop or move all its troops out of range.