Reform FAFSA: Getting Money to the Students Who Need It

Congress took a step in the right direction towards making college more affordable for low- and middle-income students last month when it passed legislation boosting financial aid and reducing debt burden. But despite this effort, the federal system of student financial aid remains largely broken. Students are often kept in the dark about how much aid they are eligible for, and once they find out, it is often too late to affect their enrollment decisions. Worse still, many bright students who should be going to great colleges don't bother to apply because they assume they won't be able to afford tuition. Even if they do attend college, they often don't apply for, and thus don't receive, the aid they deserve because they are intimidated by the notoriously lengthy and complicated application form for federal aid (FAFSA) which makes filling out a tax return look like a walk in the park. Without significant reforms to the aid application process, much of the extra $20 billion Congress set aside for making college affordable may never get to the students who need it.

It's no secret that the system needs fixing. When Secretary of Education Margaret Spellings announced the recommendations of her Commission on the Future of Higher Education in September 2006, she held up the 127-question FAFSA form for shock value and called for reforming the "highly complicated, byzantine" application process. Education officials discussed how to do just that yesterday at a session at the College Board's annual meeting.

The best plan I've seen comes from Susan M. Dynarski and Judith E. Scott-Clayton at Harvard's Kennedy School of Government. Their proposal for "college grants on a postcard" [PDF] shortens and simplifies the federal aid application. But Dynarski and Scott-Clayton recognize that "simplification must achieve more than a shortened application form: families need certain information about aid eligibility, and they need it early." To that end, they propose combining "Pell Grants and the Hope and Lifetime Learning tax credits for undergraduates into a single, streamlined grant administered through the Department of Education, using information already collected by the Internal Revenue Service (IRS)." The best part? "Eligibility can be explained on a postcard, allowing students and families to anticipate their grants many years before the college decision."

This proposal was certainly on many folks' minds at the College Board meeting last week. (InsideHigherEd has a great breakdown of the discussion here.) Some questioned whether simplifying the aid application process might have a negative effect on the students such a measure would be intended to help. After all, the purpose of having an application with so many questions is to make sure aid goes to the right students. So wouldn't eliminating these questions make it harder to determine who really needs it?

The answer is no. Think of it in cost-benefit terms. For every additional question, there is a cost: the cost of students learning the rules, collecting information from parents, and filling out the forms; the cost of federal aid administrators entering data and crunching numbers and high school guidance counselors helping students, costs realized in higher taxes and reduced services. The supposed benefit of adding more questions is that they help target the right students. But Dynarski and Scott-Clayton found that "out of more than one hundred questions on the FAFSA, only a few have any substantial impact on grant eligibility." Furthermore, a lengthier, more complex form might actually hurt efforts to target the right students as families with more resources might be able to take advantage of loopholes or other provisions that less privileged students cannot.

Congress took a dramatic step in responding to students last month by setting aside funds to help students in need. The next step is to reform the aid application process to make sure those funds get to those students.

Comments

[RobNelb]

Clarity in the financial aid process is definitely critical. People don't buy other goods without knowing the price, and people shouldn't have to choose a college without knowing the price either.

What are your thoughts, Zach?

[SharonWantsToTalk]

When I filled out my sons FASFA application, I was under the impression that answers to extensive questions might effect your eligibility beyond the obvious income eligibilities. What a farce. It had no bearing. When I attended the college aide seminar at our high school, I kept asking the reps, for income gudelines and asking questions like "isn't it as simple as how much you make and how many people in your household?" They insisted it wasn't. But as I filled the extensive application out, I was mostly filling in the blanks with my tax return. All said and done, my family of four making $55.000 was only eligible for $550 in aide for the year. Now my son was only attending an inexpensive community college and his aide would have been much more had he attended a more expensive university. But so would have been our contribution as parents. I felt it was extremely deceptive of the funding representatives not to give us this basic formula. Any time you buy a car or a house you are given these basic economic facts. The mystery of aide needs to be eliminated and replaced by hard data way before you apply to a university.