It is. If parent make $126,000 a year they're not suddenly on the hook for full tuition.

$125,000 is just the lower bound where transition is 0.

What things like FAFSA and even what Stanford is doing never consider is whether or not the parents are even going to help pay at all.

Yes, I remember friends having that problem in undergrad in Canada. There was a way around it but it was an application process with an interview. I believe they were concerned with people trying to game the system to get lower tuition fees.

In some, especially Europpean, countries such thing exist, and it's called tax. Besides paying taxes, there's no additional fees for attending university.

"Besides paying taxes, there's no additional fees for attending university."

So what countries are that?

In Europe, these are the countries I know of that either have no tuition, or only nominal fees up to €100/semester or so (for EU/EEA citizens): Austria, Denmark, Finland, Germany, Norway, Sweden. Denmark is the most generous, not only charging no tuition, but even paying students about €700/mo to attend university, in order to cover living expenses [1].

[1] http://www.su.dk/english/sider/agency.aspx