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Simplicity vs. Equity in Aid Applications

October 26, 2007

Keep it simple and low-income students will fill it out -- and go to college.

That's the thinking of many financial aid experts and government officials these days when it comes to student aid applications. Elite private universities and flagship publics alike report that they attract more low-income students when they make aid criteria simple, as in "if your family income is below X, you don't pay a penny or borrow anything." Education Secretary Margaret Spellings has been posing with the current federal aid application, complaining that it's too long and complicated. Many aid experts agree. Susan Dynarski, a professor at Harvard University, goes so far as to suggest that aid applications should fit on a postcard.

No one likes to defend long, complicated forms, of course. But at a packed session at the College Board's annual meeting Thursday, another view on simplicity emerged. Because of the current rules on the federal aid forms, many said, families of means, families with the ability to pay for their children's college education, are found eligible for federal aid. Only making these families fill out more forms -- plenty of them far from simple -- allows colleges to identify the wealthy in the aid pool.

While officials talked about how to do that work in ways that embraced the simplicity model (and technology is making some of that possible), some voiced more radical ideas.

A College Board official said that there had been some discussions with the Education Department about the possibility of using the College Board's aid applications in some form in place of the Free Application for Federal Student Aid (or FAFSA). While such a move is far from certain -- an Education Department spokeswoman said she knew nothing about these discussions and that the department was pushing simplicity -- even raising the issue surprised and intrigued many at the meeting.

Until Congress in 1992 demanded the creation of the free form (depriving the College Board of a great deal of business for its services), the board's applications were the dominant player in the field. The 1992 move is still seen as a mistake by plenty of aid officials and certainly by the College Board, where -- one official quipped -- it is known as "the great divorce."

Since then, students have used the FAFSA for federal aid, but many colleges -- especially those with decent aid budgets -- also use College Board services or individual forms to determine their own aid allocations. One concern several raised at the meeting was an increasing divergence between the "federal methodology" (as FAFSA is known) and the "institutional methodology" (as institutional choices are known).

Obviously the College Board has incentives to point out flaws in FAFSA -- more colleges might use the board's services. But one of the striking things about the discussion was the number of directions it led (not all of which would necessarily lead to more business for the College Board). One aid officer in the audience said that he agreed that there should be one aid application, but he said that instead of trying to revive the College Board's pre-1992 role, aid officials should just accept that those days are over, drop the separate aid applications, and focus on improving the FAFSA. And one leading expert on student debt at the session said that the discussion pointed to the need to link up the application process and tax records -- which could be done by the Education Department and the Internal Revenue Service, and shouldn't involve the College Board.

The aid officers who presented an overview of the issues were quite balanced in discussing the issue, stressing that they were not trying to point to a single "right" answer, as they didn't think there was one. The question is: "Is the system simple enough to get the students the aid they deserve," said Mary B. Nucciarone, associate director of financial aid at the University of Notre Dame. She said she respected the research of people like Harvard's Dynarski and thought those experts were raising legitimate and important issues.

But she noted that seemingly simple solutions don't always stay that way. For example, the aid-on-a-postcard idea is premised on a grid in which a student needs only to find his or her family income level to find out about aid eligibility. But Nucciarone noted that any such system has a "cliff effect" in which there are students whose family income is a dollar more than a specified level, and who as a result see their aid awards shrink.

Mark L. Lindenmeyer, director of financial aid at Loyola College in Maryland, focused on one of the biggest differences between the federal and institutional approach: only the latter takes the value of a family home into consideration. There is obvious appeal in leaving home equity out of the consideration. Colleges don't want parents to fear that they will be on the street to pay tuition bills.

But as Lindenmeyer noted, there are also fairness issues involved. "Families with assets have a safety net, and assets give those families multiple choices," he said. He also noted that white families are much more likely to own homes than are black families, so excluding home value is excluding a form of wealth that a far greater proportion of white students have access to -- and that decision enables them to qualify for aid.

To drive home this point, Nucciarone and Lindenmeyer presented case studies of actual student aid applicants (minus names or identifying information) that showed how different the determinations are using the federal and institutional methodologies. In one case, a family at Loyola had an "adjusted gross income" (a key line on your tax forms and on FAFSA) that was negative. Lindenmeyer said that when he sees a negative adjusted gross income, he knows that 99 times out of 100, the family will be "very wealthy" and in this case the family had more than $2 million in assets. The federal system calculated that this student had demonstrated need of $19,400. Loyola saw no need that the student's family couldn't handle.

Other examples showed similar gaps between what the federal system and institutional systems determine. Lindenmeyer noted that some researchers who advocate for a simpler aid form have pointed out that one could eliminate 90 percent of the questions on the FAFSA and few Pell Grant decisions would change. While this point is used to demonstrate that the FAFSA could be shortened, Lindenmeyer asked if it might also just show that the wrong questions are being asked.

In the question period, it was very clear that the reason these issues are viewed as important is that aid officers flat out don't have enough money. They aren't trying to take money away from anyone, they said, but they operate under the assumption that every dollar going to one student isn't going to another, and the idea that they might not be giving aid dollars to the most needy is distressing.

The concept that the College Board is pushing to deal with these conflicting values is an updated version of its PROFILE system, which collects the the information that colleges can use to make decisions on institutional aid. The new innovation is to shift the questions in the computer system around based on the initial answers a student provides. Students whose families don't own homes will never see the questions on home equity. Students who meet criteria identifying them as very poor are asked the appropriate questions, but not the queries designed for middle class families. The idea is that students will answer far fewer questions, but the right ones.

After the presentations, Robert Shireman, founder of the Project on Student Debt, asked whether the College Board might be approaching a period when it would want to restore its former role dealing with all aid applications. That's when Kathy Little, a senior adviser on student aid policies at the College Board, said that there had been some discussion with the Education Department about this idea, and that there was interest "at some level" while there were concerns about the fact that the College Board charges people to fill out its forms (with waivers for the lowest income students).

Shireman said he was concerned about the idea. He is a fan of an experiment currently going on in which H&R Block is offering taxpayers below certain income levels the opportunity to fill out a FAFSA equivalent. To Shireman, it points to a solution the Project on Student Debt has been pushing -- linking tax forms and student aid applications so that accurate, current information can be used, with minimal effort by the aid applicant. Even though he likes the idea of what H&R Block is doing, he doesn't think society should rely on a tax preparation company, any more than on the College Board.

Added Shireman: "We are heading toward a repeat of the problem we had in 1992 -- big players like the College Board or H&R Block creating the impression that the easiest and safest route to federal aid is to pay them."

 

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