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States' Cautions on Simplification

August 12, 2009

The push to simplify the process of applying for federal financial aid has been steadily building momentum, with federal officials (in both of the last two administrations) joining advocates for students and financial aid experts in a show of near unanimity on the idea that procedures and documents (like the Free Application for Federal Student Aid) should not be discouraging students from seeking financial help for college.

But lurking in the background, and explaining the need for the modifier "near" before "unanimity" in the previous sentence, has been the prospect that greatly limiting the amount of information that students and families must report on the FAFSA may serve the federal government's needs, but fail to give states the data they need to allocate their own grants and loans.

That idea is lurking no longer.

The National Association of State Student Grant and Aid Programs, which represents officials who oversee the awarding of state-based financial aid, released a survey of its members on Tuesday that might be seen, at the extreme, as trying to put the brakes on the simplification runaway train; at the least, it's a call for their needs and those of their students to be considered as policies evolve.

It's not that the state officials oppose the philosophy behind simplification; far from it, says Marie Bennett, who heads the state aid association's Washington office. "We absolutely support finding good, constructive ways of simplifying the aid process, and we understand that the FAFSA is really the gateway to those processes," she said."But what we also know is that particularly when you start dealing with changing the data elements" -- the financial and other information that is collected -- "you can really affect the processes states use to award their own aid. And that's where we get most concerned."

A bit of history is important here. For many years, until the early 1990s, many states had their own financial aid forms to supplement the federal form, because they sought specific information about applicants' financial situations that was not captured by the federal process. Throughout the 1990s, states worked closely with the federal government to incorporate into the federal form questions to solicit the data they needed -- part of what led the FAFSA to balloon to its current, oversized length.

State aid officers have no problem with many of the ideas for trimming the fat from the FAFSA form, such as most of those laid out in the Obama administration's first steps, announced by Education Secretary Arne Duncan in June, for simplifying the aid form. They also do not appear to object to the idea, which is also part of the Obama plan and essential to groups like the Institute for College Access and Success, of pre-populating the FAFSA with financial information already available from the Internal Revenue Service.

But problems emerge in the eyes of state aid officers when talk turns -- as it has in proposals from financial aid experts and a College Board-organized panel of researchers and policy makers -- to dramatically altering the types of financial information collected about aid applicants. The most aggressive simplification proposals have recommended basing the awarding of federal Pell Grants on adjusted gross income and family size, wiping out other aspects of the current federal methodology used to calculate a student's expected family contribution.

Going that direction "would have financial, administrative, statutory and regulatory consequences to state need-based financial aid programs," because almost all states use the expected family contribution to allocate their own need-based aid, the state aid group says in its survey.

Foremost among those consequences, the survey suggests, is the fear that dropping assets from the formula for allocating aid would qualify many more students with low incomes but significant wealth for state need-based aid (an assertion that not all financial aid experts endorse). In response, states would need to (1) increase the financial aid funds they make available to cover the increased number of and amount sought by aid recipients; (2) spread their existing funds among more students, reducing the amount awarded to individuals; or (3) find "alternative means" to continue to collect the information they need to "make need-based awards with the same level of precision as is used today."

The first possibility is highly unlikely given most states' budget situations, which are bad now and could get worse; the second, the NASSGAP survey report says, would conceivably lower the amount of financial aid that goes to students now, an undesirable prospect. The last prospect, of having states set up their own means of collecting the asset and other data if the federal government stopped doing so, would cost hundreds of thousands of dollars and take up to two years, in some cases -- money and time states could not afford. "States don't have money to set up their own sophisticated, maintainable versions of the expected family contribution process," said NASSGAP's Bennett.

The preferable alternative -- and ultimately what the state aid officials seem to be asking for -- is that the federal government, in redesigning the FAFSA process, make full use of "smart" technology to allow aid applicants to fill out the minimum necessary federal information, but also seamlessly direct them to integrated questions that their individual states need answered. "What what we're envisioning right now is a short menu of state questions from which states could choose," said Bennett. All of the state-required information would reside in the federal database that captures FAFSA information, so that states would not have to build their own expensive technological infrastructures or processes for correcting data, she added.

"A technological solution that reduces appropriately the basic FAFSA to a minimum, but also provides a means for obtaining data needed by individual states, would be ideal," the NASSGAP report concludes.

"We just need to be at the table where the decisions are made," Bennett said of future discussions about simplifying the FAFSA and the federal financial aid process generally. "We need to be involved in analyzing and restructuring this so students don't miss out on billions in state need-based grant aid."

So far, in all their public comments, federal officials and even those pushing for the most aggressive changes in the federal financial aid formulas have seemed open to making sure states get what they need. The College Board-sponsored Rethinking Student Aid report, which called for basing federal aid on adjusted gross income and family size, specifically said that the Education Department and the IRS should work together to give states the additional financial and demographic information they need to determine whether individual applicants qualify for need-based state aid.)

And in unveiling its proposal for FAFSA simplification in June, the Obama administration said the Education Department would "work with state agencies to make it easier to answer questions that the states need but the federal government does not."

"It seems like everybody really has the same interests at heart," said Lauren Asher, president of the Institute for College Access and Success, which has promoted FAFSA simplification. "The federal programs are there to make sure people who are college qualified can actually afford to go to school and get through, and right now the current financial aid application process is more of a 'Beware of Dog' sign than a welcome mat. In making changes, there may be tradeoffs, and some of those tradeoffs may affect states, so it's very important that they be part of the conversation about what those tradeoffs might be."

 

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