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First Steps Toward Simplifying the FAFSA

First Steps Toward Simplifying the FAFSA

Mark Kantrowitz

July 05, 2009

Proposals for Simplifying the FAFSA

Several student aid policy experts have identified the complexity of the FAFSA as an important problem and have proposed simplifying the form and formula in order to make it easier for low and moderate income students to apply for student aid.

  • In September 2000 FinAid launched the Quick EFC calculator as an example of a way in which the federal need analysis formula could be simplified. It was the result of a sensitivity analysis that found that more than 50 of the questions on the FAFSA had a minimal impact on the Expected Family Contribution (EFC). Replacing these questions with average values yielded an estimate of the official EFC that was off by no more than $500.

  • In September 2002 Mark Kantrowitz included a proposal to simplify the federal need analysis methodology with something similar to Quick EFC as part of his recommendations for reauthorization of the Higher Education Act of 1965. He also proposed pre-filling the FAFSA with data from the IRS and replacing household size with the number of exemptions, and suggested that the FAFSA form could be replaced with a postcard.

  • In September 2006 Mark Kantrowitz repeated and expanded upon these recommendations in testimony before the Advisory Committee on Student Financial Assistance (ACSFA). The Advisory Committee on Student Financial Assistance (ACSFA) is a committee established by Congress to advise it on student aid policy.

  • At the same September 2006 hearing ACSFA released its report, Mortgaging Our Future: How Financial Barriers to College Undercut America’s Global Competitiveness (September 2006, May 2008 update), which conservatively estimated that 170,000 to 320,000 college-qualified low and moderate-income students do not obtain bachelor’s degrees each year solely because of financial barriers. (This is not a new concern. Before passage of the Higher Education Act of 1965, President Lyndon B. Johnson wrote on May 22, 1964 that “Each year more than 100,000 high school graduates, with proved ability, do not enter college because they cannot afford it.”) The ACSFA report recommended streamlining the online FAFSA and introducing a simpler “EZ FAFSA” to increase the number of low income students applying for student aid. This followed up on the previous ACSFA report, The Student Aid Gauntlet: Making Access to College Simple and Certain: Final Report of the Special Study of Simplification of Need Analysis and Application for Title IV Aid (January 23, 2005).

  • In February 2007, Susan Dynarski and Judith Scott-Clayton published a discussion paper entitled College Grants on a Postcard: A Proposal for Simple and Predictable Federal Student Aid. This paper reported that basing the EFC on just income and assets changes the EFC by less than $100 for 77% of students and by less than $500 for 88% of students, confirming Mark Kantrowitz’s earlier estimate. They proposed adopting replacing the FAFSA with a simple mapping from income bands to Pell Grant amounts.

  • In July 2007, Mark Kantrowitz proposed using the same formula as income-based repayment (IBR) for need analysis. The IBR formula caps monthly loan payments based on a percentage of discretionary income, where discretionary income is defined as the amount by which adjusted gross income (AGI) exceeds a multiple of the poverty line for the family size. If the IBR formula is sufficient for measuring ability to pay after a student graduates, it should be sufficient for measuring ability to pay while the student is enrolled in college. This simplified EFC formula is the same as the IBR formula but divides the result by the number of children in college.

  • In September 2008 the Rethinking Student Aid Study Group led by Sandy Baum of the College Board and Mike McPherson of the Spencer Foundation also recommended simplifying the FAFSA. They proposed adopting a phaseout-style formula where a student would qualify for a full Pell Grant with AGI at or below 150% of the poverty line. The amount of Pell Grant eligibility would decrease with increasing AGI until AGI reached 250% of the poverty line. This yields a formula that is remarkably similar to the IBR-like simplified EFC formula.

  • In June 2009 the National Association of Student Financial Aid Administrators (NASFAA) released the results of a simplification survey that demonstrated that two-thirds of college financial aid administrators support simplification of the FAFSA, including cutting some questions from the FAFSA and using IRS data to prefill data elements on the online FAFSA. However, financial aid administrators were more equivocal in their support for some methods of simplifying the form, such as using prior-prior year data, eliminating untaxed income questions and eliminating asset questions. NASFAA also released a policy paper with eight recommendations concerning FAFSA simplification as part of its National Conversation Initiative.

  • In September 2009, Eric Bettinger, Bridget Terry Long, Philip Oreopoulos and Lisa Sanbonmatsu released a paper The Role of Simplification and Information in College Decisions: Results from the H&R Block FAFSA Experiment (announcement) concerning an experimental study of the potential impact of simplification. The paper reported a 30% increase in college enrollment rates, a 39% increase in FAFSA submissions by high school seniors, a 186% increase in FAFSA submissions by independent students who had never enrolled college and a 58% increase in FAFSA submissions by independent students who had previously enrolled in college.

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