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First Steps Toward Simplifying the FAFSA

First Steps Toward Simplifying the FAFSA

Mark Kantrowitz

July 05, 2009

Congressional Action

Amidst the growing consensus in the student aid community of the need for FAFSA simplification, Congress included several proposals as part of the Higher Education Opportunity Act of 2008 (P.L. 110-315). Congress proposed establishing a simplified EZ FAFSA form for aid applicants who qualify for the simplified needs test and automatic zero EFC, along the lines proposed by ACSFA. Congress also proposed reducing the number of data elements on the form where possible and streamlining the Renewal FAFSA by prefilling the form with the previous year’s data elements, and established a goal of reducing the number of data elements by 50%. Congress also authorized the sharing of IRS data with the US Department of Education for the purpose of prefilling data elements on the FAFSA, and authorized the use of prior-prior year tax data instead of prior-year tax data to facilitate this streamlining of the FAFSA.

Initial Steps by the US Department of Education

The Higher Education Opportunity Act of 2008 also required the US Department of Education to submit a report on its efforts to simplify the FAFSA. That report was published in January 2009.

In June 2009, US Secretary of Education Arne Duncan unveiled the US Department of Education’s three-step approach to FAFSA simplification (Press Release, Fact Sheet):

  1. Skip Logic. The online FAFSA will skip unnecessary and irrelevant questions. The online FAFSA already includes some skip logic, such as not requiring independent students to complete the parent questions. The US Department of Education will adopt more sophisticated skip logic, such as not requiring independent students who are 24 years old or older or who are married to answer the remaining 11 dependency test questions. It will also omit the selective service question for students over age 26 and asset questions for students who qualify for the simplified needs test.

  2. Legislative Proposals. The US Department of Education is proposing that Congress remove any question about income or assets that is not available from the federal income tax return. This includes more than half the financial questions. Less than 4% of dependent students have a contribution from parent assets, so the US Department of Education is proposing to eliminate the six questions about assets from the FAFSA. This would also eliminate any penalties in the formula that discourage families from saving for college, so that college savings would no longer affect eligibility for need-based financial aid.

  3. Prefilling with IRS Data. The US Department of Education will allow families to prefill the online FAFSA with data from their federal income tax returns. Families applying for financial aid in the spring semester will be able to prefill 20 of the FAFSA questions using federal income tax return data (26 questions if the US Department of Education’s legislative proposals are not enacted).

More Simplification is Necessary

While the common sense changes in this “shorter, simpler and more user-friendly” FAFSA are a step in the right direction, much more simplification is needed. The ability to prefill the form with IRS data cuts about a page from the six page form. Taken together, all of the US Department of Education’s proposals will eliminate 2-3 pages of the FAFSA form. That still leaves families with a fairly long and complicated form. Some simplification helps, but more simplification will help a lot more. To have a more meaningful impact on application rates it is necessary to fit the FAFSA on a postcard and cut the completion time to 15 minutes or less. This can only be accomplished by simplifying the formula, not just the form.

As discussed above, there are already four proposals for simplifying the formula that could fit the FAFSA on the back of a postcard. These include Mark Kantrowitz’s Quick EFC and IBR-like formulas, Susan Dynarski’s income-based table formula and Sandy Baum’s income-phaseout formula. These proposals have an added benefit of increasing the transparency of the need analysis formula so that families can predict and plan for future need-based aid eligibility.

Unfortunately, there is still some resistance to simplification. A key concern is that some states might adopt their own forms if the FAFSA simplification goes too far, leading to a net increase in complexity. However, many states already require their own supplemental forms for state college grants, including most of the more populous states.

Mark Kantrowitz is a nationally recognized financial aid expert.


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