Simplifying the FAFSA

This post originally appeared on the National College Access Network (NCAN) blog.

By Diane Cheng, Research Director at The Institute for College Access & Success (TICAS), and Erica Rose, Senior Director of Programs, Massachusetts, at uAspire

Affordability is a key issue for many students and families when choosing which colleges to apply to and attend, but the financial aid process can seem overwhelming. At the recent NCAN conference in Pittsburgh, TICAS and uAspire shared specific ways that counselors can help students and families approach the issue of college affordability and understand their financial aid options.

Here are a few of the tips and tools we shared:

  1. The Financial Aid Toolkit from the U.S. Department of Education is an online "one-stop shop" for counselors, with information about financial aid and a searchable database of resources – including resources in Spanish and information for parents.
     
  2. To help decide where to apply, students and families can use the Education Department's College Scorecard, an online college comparison tool with data on costs, graduation rates, debt, post-college earnings, and more.
     
  3. To look past sticker price and get early, individualized estimates of financial aid, students can use net price calculators. These online tools are required to be on almost all college websites, and can help students start thinking about affordability early in their college search.
     
  4. Students and parents can now fill out the FAFSA on their phones, using FAFSA.gov or the myStudentAid mobile app. However, certain functionality is only available on FAFSA.gov and not currently available on the mobile app (e.g., access for undocumented parents who can’t get an FSA ID, and students’ ability to view their Student Aid Report or make corrections to their FAFSA).
     
  5. Since students can now start filling out the FAFSA on Oct. 1 each year, they should start building college lists during their junior year. Those lists should include colleges that students know they have a good chance of being accepted to and can afford. Students should also fight the urge to make a deposit before receiving and reviewing all award letters – wait until National College Decision Day (May 1)!
     
  6. When filling out the FAFSA, students and parents should use the IRS Data Retrieval Tool (DRT) to electronically transfer their tax data into the FAFSA. This tool helps simplify and shorten the FAFSA process as well as reduce how much documentation students have to provide if they are selected for verification.
     
  7. Students are not done with the financial aid process after they complete the FAFSA! Some will be selected for verification and required to submit additional documentation to colleges before they can receive financial aid. Counselors can help by having students request IRS documentation early (tax transcripts if they or their parents filed taxes, and verification of non-filing if they didn’t file taxes), making sure they keep an eye out for verification, and reassuring them that being selected doesn’t mean they did anything wrong!
     
  8. Our research has found that many financial aid award letters are inconsistent, confusing, or misleading to students. Counselors can help by providing a glossary of terms, analyzing and comparing award letters with students and families, and brokering communication with colleges. See more tips here.
     
  9. When reviewing estimated bills, students should consider savings, tuition payment plans, summer work, and outside scholarships before considering loans. If they need to borrow, they should turn to federal loans first, which guarantee consumer protections and repayment options that private loans do not.
     
  10. For information about student loans, check out TICAS’ resources on projectonstudentdebt.org and the Education Department’s resources on StudentAid.gov and YouTube. The Education Department also offers an online repayment estimator that can help students see how expected borrowing translates into monthly payments and understand the range of repayment plans available for federal student loans (including some plans where payments can be as low as $0).

For more tips, see our handout from the conference.

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This week, the U.S. Department of Education announced two changes that will simplify an important but frequently overlooked part of the financial aid process, starting with the 2017-18 school year. As a result, low-income students who file a Free Application for Federal Student Aid (FAFSA) will face fewer barriers to receiving the aid they qualify for, and college financial aid offices will be able to spend more time helping students instead of chasing paper.

The financial application process doesn’t end when students submit the FAFSA, which is the gateway to federal grants, loans, and work-study as well as most state and college aid. Last year alone, 5.3 million students – one in four FAFSA applicants – were required to provide extra documentation to their colleges before they could receive federal student aid. This added step in the FAFSA process is called “verification,” and it mostly affects students with family incomes low enough to qualify for a need-based federal Pell Grant. Our 2010 study, After the FAFSA, found that that the complexity of the verification process unnecessarily prevents many low-income students from receiving aid they are otherwise eligible for. Even for those who get through all the paperwork, the added hurdles delay access to needed aid by weeks or even months into the school year.

The Department has now announced that it is eliminating certain burdensome verification requirements based on clear evidence that they are not worth the trouble for students, schools, or taxpayers.

One of the reasons the Department of Education currently flags students for verification is if the income reported on their FAFSA appears too low to support their household. These students must then document their sources of income and may have to explain how their family survives financially. A recent Boston Globe piece details just how difficult this process can be, and college financial aid administrators have reported tremendous and unnecessary costs to students and schools.

Starting in 2017-18, students will no longer be targeted for verification simply because their families are very poor. The Department of Education said it is eliminating this type of verification because evidence showed that “the burden on families […] far outweighed the benefits.” Nearly all students selected for this form of verification (95%) did not see changes to their Expected Family Contribution (EFC), which is used to determine federal aid amounts.

In addition, students who are flagged for verification for other reasons will no longer have to provide extra paperwork if someone in their family received SNAP benefits (formerly called food stamps) or if they made child support payments. The Department of Education found that verifying those pieces of information did not make students more or less eligible for aid.

We applaud the Department of Education for removing these unnecessary verification requirements, which made the aid application process more complicated for the neediest students. This is an important step, but more still needs to be done to ensure that the FAFSA verification process protects the integrity of the federal student aid program without unduly denying or delaying access to aid that eligible low-income students need to succeed.

This Administration has already dramatically simplified the initial FAFSA filing process for millions of students and families, making it possible for them electronically transfer their tax information into the FAFSA and apply for aid when they typically apply to colleges, as TICAS and many others have urged. We look forward to working with Congress and the Department of Education to further simplify the aid application process from beginning to end for students and schools, both by eliminating unnecessary questions on the form and by further reducing unnecessary verification and paperwork.

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I'm glad Secretary Spellings is taking a step forward: developing specific examples and proposals forces people to think and be creative in response. But I have to admit that the sample form raises a lot of questions about what the Department's proposal is, and whether it will require legislation to implement. Are a student's own earnings going to be completely eliminated from the eligibility formulas? The form asks for the student or the parent's income, not both. One minor point about the "26" questions: in some cases the numbers were removed but the number of questions remained the same (for example, the two questions about selective service registration have one number on the new form but two numbers on the old form). Counted by the same method as the 106 on the old form, the sample form has 41. But focusing on the raw number of questions is sort of like looking at test scores without context. Families don't mind having to answer easy questions like their street address or whether they have other children already in college. The goal should be to eliminate the difficult, show-stopper questions that require the applicant to do research or to be a tax expert. To accomplish that goal, the Department will have to go beyond this first step. Congress last year paved the way for the Secretary to work with the IRS on a system that, with the taxpayer's permission, would feed information directly from the tax form into the financial aid application process. Yet there is no evidence in this announcement of any IRS cooperation. The form still asks applicants to find numbers on particular lines on their tax forms. -Bob Shireman

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On April 1, the U.S. Department of Education released the FAFSA4caster, an online tool intended to help families plan for college by providing early estimates of their federal financial aid eligibility. To get an early aid estimate, students and their parents have to answer 96 questions from the actual FAFSA. Positives: For students and parents who are not put off by the volume and complexity of questions in the FAFSA4caster, it will be a useful tool. It can give them a good sense of what they will be expected to pay towards college costs and what federal aid they may be eligible for. In addition, the data they enter will be used to pre-populate many elements of the full FAFSA when they are ready to officially apply for aid. This is a good use of technology that will allow aid applicants to pick up where they left off, rather than starting from scratch. Negatives: The FAFSA4caster requires students and parents to answer all of the most difficult and error-prone income questions that make the actual FAFSA so intimidating. You still have to track down all the tax documents, make various calculations, and transfer the answers from one form to another by hand. Suggestion: The way to make this tool easy and inviting is to significantly reduce the number of high-stakes questions that applicants have to answer themselves. That can be accomplished -- without diminishing the accuracy of the aid estimate -- by letting users authorize the IRS to answer 31 of the questions automatically. We encourage the Department to take this opportunity to simplify the FAFSA4Caster as soon as possible. Because the estimate it produces is non-binding, the Department could use whatever year of income data is available from the IRS at the time students and parents use the new tool. For more about how this approach could make the whole aid application process easier, see Going to the Source: A Practical Way to Simplify the FAFSA. FYI: To get a sense of how hard it is to create a simple aid estimation tool given the income data that applicants are currently required to provide themselves, see these valiant attempts by FinAid! and the College Board.

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The most inefficient and intimidating part of the financial aid process is requiring students and families to transcribe, calculate, and submit piles of income information that the government already has. An article in today's Inside Higher Ed describes how researchers are conducting an experiment with H&R Block that pre-fills the FAFSA with selected clients' tax data. Over the past year, The Institute for College Access & Success has been exploring a way that all students and families could benefit from a similar approach. We've found that it's both technologically feasible and perfectly legal for financial aid applicants to give the U.S. Department of Education access to the needed income information in their tax records. People already do this whenever they apply for a mortgage and in many other situations. For more about this approach, see our testimony before the Advisory Committee for Student Financial Assistance.

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One well-documented obstacle to economic diversity is the financial aid application process itself: the FAFSA is incredibly long, confusing and intimidating. When low-income students don't apply for financial aid, they miss out on resources that could increase their chances of success in college by allowing them to go to school full time, work reasonable hours, and attend more supportive institutions. In a paper published this April, Harvard economists Susan Dynarski and Judith Scott-Clayton examine how the FAFSA can be a barrier to access and aid. Among their findings: "the basic step of locating financial records is an obstacle for poor students, due to higher mobility rates and family dysfunctions such as divorce and separation of children from parents." A recent ACE report found that nearly two million Pell-eligible students did not apply for financial aid in 2003-04. For the lowest income students, financial aid application rates are flat (for dependents) or declining (for independents), even as overall aid application rates rise. Calls for FAFSA simplification usually focus on changing the formula that determines aid eligibility, so that it requires less data from students and parents. These proposals rarely make headway because they require difficult and politicized choices about eligibility, equity and cost. The good news is that there's a very practical way to make the FAFSA easier for students and families to use, regardless of the underlying formula. That's because the government already has some of the most important information used to calculate eligibility. Instead of having to dig through piles of tax records and do complex calculations, applicants could simply provide access to their IRS transcripts. The data could be processed electronically, eliminating many of the most difficult FAFSA questions and worksheets. People routinely give this permission when they apply for loans, and many commercial entities use this tool to verify income information. There's even a line on the IRS transcript request form that says: "If the transcript or tax information is to be mailed to a third party (such as a mortgage company), enter the third party's name, address, and telephone number." The private contractors running the Federal Direct Loan Program already use a consent form to access Income Contingent Repayment Plan users' IRS data. And some local governments have incorporated the IRS form into applications for benefits for working poor families. So, why not build it into the FAFSA itself, and lower a barrier to access?

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