fafsa simplification

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FAFSA Simplification

Mark KantrowitzPublisher of Edvisors.com

Confidential, Distribute Only as permitted by Edvisors Network, Inc.Copyright © Edvisors Network, Inc. (www.edvisors.com) 2

Overview of the FAFSA

The FAFSA is the Free Application for Federal Student Aid

The FAFSA is used to apply for student financial aid from the federal government, state governments, most colleges and universities and some scholarship programs

A total of nearly 21.2 million students filed new or renewal FAFSAs in 2013-14

Applicants spent an estimated 24 million hours completing the form


Number of FAFSAs by Year

Number of Financial Aid Applications

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 -

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

11.4 million

14.0 million14.6 million

16.4 million



21.2 million


Why Simplify the FAFSA?

Complexity of the FAFSA acts as a barrier to access and completion– Students who file the FAFSA are more likely to graduate – Students who do not file the FAFSA are more likely to work, with about

a third working 40 or more hours a week

Students are leaving money on the table– In 2011-12, approximately 2.0 million students who would have

qualified for a Federal Pell Grant did not file the FAFSA– Of these, 1.3 million would have qualified for a full Federal Pell Grant

Reasons why students didn’t file the FAFSA– 46.7% thought they were ineligible– 37.5% said that they had no financial need– 34.1% did not want to take on debt– 13.6% had no information on how to apply– 9.4% said the forms were too much work


Benefits of Simplification

Reduce the amount of time required to complete the form

Eliminate the need for verification of FAFSA data Free up college resources for counseling students More students will enroll full-time Fewer students will work full-time while enrolled in

college, leading to improved academic performance Graduation rates will increase Less stress on students, families and financial aid

administrators Fit the FAFSA on the back of a postcard or integrate it

into federal income tax returns


Complexity is Not Necessary

Some colleges prefer complexity to try to prevent a handful of wealthy students from looking poor– The FAFSAs of low-income students are much more likely to be

selected for verification than the FAFSAs of middle- and upper-income students

These colleges are chasing after a false sense of precision Financial aid formulas are little more than devices for

rationing aid– Most colleges do not meet the full demonstrated financial need of all

eligible students.

Simplification will not introduce much error into the expected family contribution (EFC) – The federal need analysis methodology can be reweighted to yield a

revenue-neutral result– Most FAFSA questions can be eliminated without significantly affecting

the allocation of financial aid funds


Most Federal Benefit Programs Are Simpler Most means-tested federal benefit programs base

eligibility on family income below 130% or 185% of the poverty line– Supplemental Security Income (SSI)– Free and Reduced Price School Lunch– Supplemental Nutrition Assistance Program (SNAP)– Temporary Assistance for Needy Families (TANF) – Special Supplemental Nutrition Program for Women, Infants

and Children (WIC)

Education tax benefits determine eligibility based on the taxpayer’s income, disregarding assets and other factors.


Current Simplification Efforts Are Inadequate Skip logic attempts to simplify the FAFSA by adjusting

the set of questions based on answers provided earlier in the form

But, the FAFSA must add several questions to determine whether the student can use skip logic

In some cases, skip logic requires students to answer more questions, not fewer– An extra 16 questions must be answered by dependent students

to qualify for the Simplified Needs Test, which eliminates 6 asset questions

– Applicants must answer as many as 9 questions to use the IRS Data Retrieval Tool, which prefills the answers to up to 11 questions

– All students must answer more questions so that some students can answer fewer questions


Three Approaches to Simplification

Sensitivity Analysis. Analyze the impact of the possible answers to each question on the EFC. Eliminate any question that causes a small variation in the EFC by setting the answer to the average value.

Adapt the Income-Based Repayment (IBR) formula. If income-based repayment works for determining affordability after graduation, why not use it for determining affordability during enrollment? Base the EFC on 15% of discretionary income (AGI – 150% poverty line) divided by the number of children in college.

Phase-Out Formula. Students would qualify for a full Federal Pell Grant with family income (AGI) at or below 150% of the poverty line. The grant would be reduced proportionately until AGI reaches 250% of the poverty line.


Enhancements to Simplification

Prior-Prior Year (PPY) vs. Prior Year (PY)– The FAFSA currently uses one-year-old data to approximate

income during the award year– Prior-prior year would use two-year-old data instead– If PPY data is adjusted for inflation, it will not yield much of a

difference in financial aid eligibility– PPY would allow students to apply for financial aid before

applying for college admission

Publish tables that map from income and family size to Federal Pell Grant eligibility or net price. Such an approach would be more accessible to low-income students.

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