FAFSA for All

Requiring it would increase the chances that more low-income students go on to college as well as significantly improve the ability of the federal government to make good policy, argues Catharine B. Hill.

February 24, 2020
 
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As Democratic presidential candidates debate what to do about student loan debt, with proposals’ price tags in the billions, one low-cost, simple policy change could increase college graduation rates among lower- and middle-income students -- and, in many cases, reduce their need to borrow. All students applying to college should fill out and submit the federal financial aid form known as FAFSA, and every college should be required to report the incomes of all their students.

The Senate Health, Education, Labor and Pensions Committee passed a bipartisan amendment to the Futures Act that, in addition to guaranteeing permanent funding for historically black colleges and universities, would significantly simplify the Free Application for Federal Student Aid. The current FAFSA form, required for federal financial aid as well as much of the available institutional aid, is, to put it mildly, complicated. Failing to fill it out reduces the likelihood of college enrollment and eventual completion by reducing access to financial aid.

Simplifying the form is a key first step. Another step in the right direction is each state requiring all high school seniors to fill it out as a graduation requirement, as Louisiana has done and Illinois and Texas will begin soon.

I propose a third step, once students applying to college fill out and submit the FAFSA, whether they are applying for financial aid or not: colleges would then be required to report those data to the U.S. Department of Education. A requirement would make it more likely that high schools take on the responsibility of helping all students get this form completed. They help with other forms related to applying to college, so why not this significant one? As it is now, that burden falls most heavily on lower- and middle-income students. If it fell on all, there would be greater pressure to simplify the form and to make sure all students completed it. More states would surely follow the lead of Louisiana, Illinois and Texas.

Another vital reason for more states to impose this requirement is that many lower-income students don’t even apply for financial aid. Yet they would qualify for it, thereby increasing their chances of going on to higher education. The FAFSA scares people away. It can be that daunting, despite efforts to simplify it.

What about higher-income students who don’t need the aid and are confident that they don’t qualify for it? Having them submit the FAFSA would not be a heavy lift. There could even be a very simple EZ FAFSA option, requiring just one number: adjusted gross income. That requirement would be minimal, especially compared to the overall college application process, since almost all of these families are already filing tax returns. And the federal government made the FAFSA process easier with the IRS auto-fill function for many of the required fields from taxpayers’ 1040 forms.

Additionally, a universal FAFSA requirement would significantly improve the ability of the federal government to make good public policy. For example, colleges and universities currently don’t know the incomes of all their students, since only students applying for federal need-based financial aid have to complete the FAFSA. Once the proposed universal FAFSA completion process is in place, colleges and universities seeking access to federal financial aid and special tax treatment would be required to report the income distribution of all students annually, through the Integrated Postsecondary Education Data System. Currently, institutions only have to do so for students receiving Title IV funding.

Still think it unfair to ask families to submit a FAFSA even if they don’t want access to federal financial aid? Then consider that all students receive a subsidy above and beyond their tuition payments -- even if they pay the full sticker price. Here’s how that happens: all students benefit from gifts coming in to their college or university, such as donations to the annual fund, or from earnings on an institution’s endowment. Both examples are linked to favorable federal and state tax provisions. And the more selective colleges and universities with the largest endowments tend to have the largest shares of high-income students as well as the largest subsidies from those sources.

It is completely reasonable for policy makers to expect certain outcomes from highly subsidized institutions in exchange for federal and state financial support. This new FAFSA policy would result in greater transparency on the part of colleges and universities regarding admissions decisions and the resulting socioeconomic diversity of their students.

FAFSA for All would lead to a higher number of lower- and middle-income students being eligible for financial aid, including Pell and institutional grants, reducing their need to borrow. Greater transparency could also encourage colleges and universities with higher graduation rates to do more to recruit lower- and middle-income students, as they respond to public pressures to justify their large federal and state tax advantages. Expanded financial aid resources and more enrollment opportunities would significantly benefit lower- and middle-income students.

Policy makers must create the incentives that encourage greater commitment to equal opportunity and social mobility on the part of colleges and universities. Without all the data, it is difficult to do so. FAFSA for All and the resulting rich data set will be a great place to start.

Bio

Catharine B. Hill is managing director of Ithaka S+R and president emerita of Vassar College.

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