How to Trim FAFSA's Fat

March 21, 2007

The complexity of the federal financial aid process is among the more obvious, and ostensibly, fixable reasons  cited to explain why low-income students are far less likely to attend college than their peers. So far, despite efforts on multiple fronts, the system has proven to be somewhat intractable.

But on Tuesday, the movement to simplify the process -- jump-started in September when Secretary of Education Margaret Spellings performed a stunt unfavorably showcasing the length of the Free Application for Federal Student Aid relative to the standard tax form -- gained new momentum.

Rep. George Miller (D-Calif.), chairman of the House Committee on Education and Labor, and Rep. Rahm Emanuel (D-Ill.), announced new legislation that would cut the form's length from five pages to two, while increasing Web access, allowing high school juniors to file a “Pre-FAFSA” for planning purposes and encouraging coordination between the Internal Revenue Service and the Department of Education. Similar legislation was also introduced in the Senate. Meanwhile, Sen. Edward M. Kennedy (D-Mass.), chairman of the Senate Committee on Health, Education, Labor and Pensions lauded the Education Department's development of a new "FAFSA forecaster" as "a good first step." (Department officials plan to unveil the new initiative today.) 

The pair of Congressional announcements from the education committee chairs complemented the recommendations of a report on FAFSA simplification released Tuesday by the Institute for College Access & Success, likewise proposing a mechanism for vastly simplifying the form by “going to the source” and promoting a better exchange of information between the IRS and the Education Department.

Lauren Asher, author of “ Going to the Source: A Practical Way to Simplify the FAFSA,” points out that 31 questions on the federal financial aid form -- or about two-thirds of those relating to income and assets -- ask for information already provided to the federal government on tax forms. Asher argues that by enabling students to easily authorize the IRS to forward that data directly to the Education Department, students would end up facing a far less intimidating form, while colleges could save millions in verification costs.

“Now is the time to really look at the question of whether families could check a box and have the IRS answer some of the toughest and some of the most important and some of the most error-prone questions automatically,” Asher, associate director of The Institute for College Access & Success, said Tuesday. She recited a FAFSA question in which students and parents are asked to consider not one, but three, different tax forms, as an example of the complexity they currently face: “It really takes a tax expert to figure it out."

“The FAFSA was designed as the gateway to financial aid,” Miller added, speaking during an audio press conference hosted by the institute. “We now see a situation in which the form itself can deter people from applying for the aid that is necessary to go to college.”

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.

Often, attempts to change the federal financial aid form focus on cutting back the amount of information requested, a controversial proposition that could alter who gets aid and how much, Asher said. Tuesday’s report doesn’t delve into questions surrounding potential formula changes, but instead advocates using technology to more efficiently collect the information already being considered.

Given the advances in electronic filing and transmission, the authors argue that students should easily be able to bypass some of the most complex financial questions by authorizing the Education Department to obtain the relevant data directly from the IRS. Under the report’s recommendations, students could apply as early as October while applications and colleges are on the brain, as opposed to January, as is currently the case, since the most recent year’s tax return would be used. (The report also emphasizes a need for an improved system through which students can more easily notify the Education Department of changes in their financial circumstances).

In addition to simplifying the process for students and reducing the possibility for error, Asher argues the shift would likewise simplify the process for colleges. With data provided directly by the IRS, colleges would eliminate the need to verify the data currently provided secondhand (estimated to cost $90 per application, or more than $400 million nationally per year) – thereby also reducing the administrative paperwork burden and the corresponding privacy risks. Meanwhile, the report recommends that the IRS should also consider how other tax forms, such as the “Verification of Non-Filing” transcript for those whose incomes fall below the tax filing threshold, could be used to help students automatically qualify for federal aid.

“This is totally feasible. Every day the IRS gets requests to send tax data to all kinds of third parties,” said Asher, referring to the fact that the agency also recently began transmitting data to third parties in electronic form. “You can have your taxes sent to your sister, if you want, anyone with an address.... We’re not talking about reinventing the wheel here; the wheel’s already there.”

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