Trim the FAFSA fat

This is a great first step but it needs to go further..Since the majority of students in college today are independent students, with limited earnings and usually no assets, now is the time to ELIMINATE the Fafsa for these persons as well as others. This change will include a significant number of persons who now need to prepare the FAFSA. In addition to the independent student, it probably would include a significant number of students from low income families.

We need to catch up with the IRS. As you know, if you have only straightt income, you only need to sign a postcar5d and the IRS calculates the tax due. Next step, let us convice IRS to do the FAFSA calculation for our college students. The result would be a great service and also improve access.

The next big step is to completely overhaul the Financial aid system. It was launched in 1965 and it needs a comprehensive overhaul- top to bottom, so this great program will better serve our country. The financial aid system, education tax peograms- all make the system too complicatyed for most of our citizens.

Leo Kornfeld.

Leo Kornfeld, at 11:06 am EDT on March 21, 2007

Are these really a way to improve FAFSA?

I am fairly new to financial aid being only 6 months in the field. I am a tax professional of four years, I own my own accounting firm, and I work for my local community college because I am truly dedicated in advancing education. I have a perspective that I would like to share regarding the FAFSA.

While it can be said that the FAFSA application is a tedious process, I don’t think that because the application is long its entirely undoable. I have been to many financial aid presentations with parents and students in which a serious lack of effort is put in their part. Instead of completing the FAFSA for them I have been teaching people how to fill it out. It is far too easy for people to give up when they encounter a difficult question then to seek out assistance. To be honest I don’t think I or anyone can do anything about that. In general people really need to put forth more effort.

If one wants to simplify FAFSA, is shortening the application really the answer? As of now the paper FAFSA has a set of detailed instructions and commentary for the more difficult questions. One only needs to reference the question by number and then answer the question. It is true that there are several questions that refer to a tax return however every question of this type has a line number to refer to on the tax return to get the correct answer. Anyone involved in financial aid knows that ALL the questions on the application are used to assess, and formulate a student’s financial need. Therefore, all questions are essentially necessary.

Now, there is proposal to have the Internal Revenue Service (IRS) provide the tax/financial information. For current tax year information the idea sounds great in concept but is logistically unrealistic in practice. As I mentioned, I’m a tax professional and I deal with the IRS quit a bit. I can tell you from experience the IRS can not furnish tax return information until early August when a majority of tax returns are up loaded into their system. Tax returns are up loaded as received through electronic transmission, however low income people can’t afford to have their taxes electronically filed (and often times they don’t even have the money to even have them prepared). Even if having the information available “in real time”, anyone who is applying for Federal aid would have to file their tax return before state submission deadline (for most states early March). Then there are people who file using a paper return, those returns take substantially longer to process and up load and the closer to April 15 they are filed, the longer it will take to process (up to six weeks). Lastly, there are two more groups that this would not work for: anyone who is selected for review (formerly know as an audit) will not have tax data available because they are limbo until the case is closed and people who don’t have a requirement to file either because they had little or no income or only unearned income (public assistance of any type).

In addition, the Institute for College Access & Success, issued a report where as the Other Issues section states, “If the Department of Education uses the most recent year of tax data that is available from the IRS when the FAFSA is filed…much of the complexity is eliminated.” However, if one were to use prior year tax information, the information would be much too old and inaccurate to assess student need. For example, if a student applies in February of 2007 for aid in the 07-08 academic year and the “most recent tax information” is to be used but her/his parent’s haven’t filed a 2006 tax return they would use 2005’s tax return information. 2005’s tax information could be obtained from the IRS but it also means that one and a half years have transpired between the time the student begins college (fall 2007) and the time the income reported was earned (end of December 2005). This is a doubled edged sword because if a family did very well financially in 2005 but had a drop in income in 2006; their EFC would be higher because of the 2005 income thus effectively reducing the amount of aid. On the flip side, if a family did poor in 2005 but had a rise in income in 2006 they would be over awarded because of a low EFC. Changes in income are a serious reality for many people that walk through our doors. In fact, people that previously could afford a college education for their children, seek us out because something bad happened to their finances.

In addition the report cites, “Many experts believe that the family incomes of dependent students fluctuate much less from year to year than the incomes of independent students.” While this may be a statistical truth, income fluctuation sometimes has little to do with the outcome of a tax return. For example we’ll follow a family of four for four years, they have an income of $34k for four consecutive years (2004, 05, 06, 07), and one child will begin College in the fall of 2007. I will also assume that they claim a $15,000.00 itemized deduction of $14,000 mortgage interest and $1,000.00 for real estate taxes. On their 2004 tax return they will have one set of figures but on following years the figures to be reported for: itemized deductions, taxable income, child tax credit, income tax, and Additional Tax credit can be different from one year to the other, and their income did not change. Although I am assuming a constant itemized deduction I want to point out the following: from this year forward millions of low income families that purchased a home in the hay days of low interest rates a few years back, did so with an interest only loan (in order to qualify) and many will have to refinance, thereby the amount of their itemized deduction will change, causing the amount of taxable income to change, changing the amount of the income tax liability. With that said, I will now assume that the family did not refinance but the following will undoubtedly occur. When that college bound child turns seventeen years of age, the parents can no longer use her/him as a qualifying child for the Child Tax Credit, thereby decreasing their tax liability credits. This would also affect the Additional Child Tax Credit, as the basis for the credit would decrease from $2,000.00 to 1,000.00. As one can see it is NOT a change in income that caused a different outcome in the figures that are reported on the tax return. Changes will naturally occur again when the second child turns seventeen, causing another chain reaction that will result in a completely new set of figures. There are far too many variables in the lives of ordinary people that have a direct affect on their tax reporting. It is unrealistic to believe that everything is constant for tax reporting purposes just because household income did not go up or down. (See table below)

Tax Year 2004 2005 2006 2007 Child one age 16 17 18 19 Child two age 14 15 16 17 Form 1040 2004 2005 2006 2007 Line 7 Gross Income 34000 34000 34000 34000 line 22 total income 34000 34000 34000 34000 line 37 Adj. gross Inc 34000 34000 34000 34000 line 38 AGI 34000 34000 34000 34000 line 40 Itemized Ded. 15000 15000 15000 15000 line 41 AGI — Item. Ded. 19000 19000 19000 19000 line 42 Exemptions 12400 12800 13200 13600 line 43 Taxable Income 6600 6200 5800 5400 line 44 Tax 663 623 583 543 line 53 Child tax credit 663 623 0 0 line 57 Income Tax 0 0 583 543 line 63 Total Tax 0 0 583 583 line 66 Earned Inc. Cr. 0 0 911 911line 68 Add. Child Tax Cr. 1337 377 0 0

As one can see from this table, every year figures on the lower half of the table changed for different reasons none of which had to do with a change in income. Please note that all the figures that changed are the figures that are asked for on the FAFSA. Furthermore, I am not convinced that, “allowing high school juniors to file a “Pre-FAFSA” for planning purposes…” will achieve the desired result unless you integrate tax preparation mechanisms to accurately forecast future tax reporting. I would like to elaborate on something Secretary Spellings touched on as stated in Elizabeth Redden’s article, “Student advocates, lawmakers and Secretary Spellings alike have criticized the complexity of the current financial aid form as being a barrier to college access, particularly among low-income students, who, the report states, tend to have greater difficulty compiling the necessary financial information. An estimated 1.5 million low-income students who were likely eligible for Pell Grants did not apply for aid in 2004, nearly double the number in 2000, according to the report.” I would argue that it is not a lack of accessibility to the FAFSA application that causes students not to apply, but a lack of access to resources for “low-income students” so they can get help from somebody who can explain to them what documents they need to gather, and how to extract information from those documents to complete the FAFSA. I am not the type of person to criticize and criticize without offering a solution, so here is my proposal. I’ve heard a rumor that in the near future the Federal government will eliminate the production of paper FAFSAs. That money can be used on an education campaign that will give financial aid administrators and staffers the resources to teach high school counselors and career center directors so that they have the knowledge to assist students. I can recall several instances, in which a high school career center director ventured on their own to assist parents and students with out any assistance from a financial aid specialist. Many times these people are well intentioned but disseminate wrong information on how to fill out the FAFSA (information that later consumes time to rectify). The more “how to” education we in Financial Aid can pass on and train others like counselors and career center technicians the more access confused students will have. Secondly, I would add features to the FAFSA on the Web application that add more user interface, with additional links to difficult questions, where the link can give examples and possibly even brief instruction video. I think this is a much better use of available technologies.

Without a doubt there is no quick fix to FAFSA accessibility, but the answer does not lie in changing the road map because you don’t like the path you must take to arrive at your destination. What we need are many points of information along the path so the journey is not so difficult.

Lastly a few words about my background, I graduated from Crafton Hills College with and AS in Accounting then transferred to CSU San Bernardino. There I received a BS in Business Administration with a concentration in accounting and unofficial minors in communications and political science. I was a member of the student government holding various positions, I was a delegate to the California State Student Association, I was a member of the Outstanding Delegation at the National Model United Nations Conference hosted by the National Collegiate Conference Association, and I was awarded a fellowship at the Leon and Sylvia Panetta Institute for Public Policy where I interned for the US House of Representatives.

If anyone has access to or knows Elizabeth Ridden, please ask her to read my comments regarding her article and the legislative proposals. You can email me at framirez@craftonhills.edu Thank you.

Fermin Ramirez, Financial Aid Outreach Coordinator at Crafton Hills College, at 9:05 pm EDT on March 22, 2007

How to Trim FAFSA’S fAT

In an effort to reduce the number of questions found on the FAFSA to make it easier for students to apply for aid, it is my hope that we keep in mind one potential problem that may be caused by eliminating certain questions. I am referencing the fact that the FAFSA has certain questions that help students to obtain “state” financial assistance. If any of these questions are removed from the FAFSA, will that mean that states will soon require a “form” of their own that students must complete. If that is true, than simplifying the FAFSA will cause more problems than it will solve.

Ellis Salim, Vice-President for Student Services at Baker College System, at 2:35 pm EDT on April 5, 2007