Simplifying Student Aid: What it Would Mean for States

This April, the College Board released the results of a study that modeled how various scenarios for simplifying the FAFSA and the federal methodology for student aid might affect state grant aid eligibility. Over the last few years, a number of reports and papers have recommended overhauling and simplifying the current FAFSA, including the College Board’s Rethinking Student Aid Study Group’s 2008 report that recommended eliminating the FAFSA altogether and relying on IRS financial information for determining Pell grant allocations.

At the same time that increasing attention has been given to simplifying the FAFSA, some have raised concerns about the carryover effects such changes might have on state need-based aid programs. Using data from 5 states (Kentucky, Minnesota, Ohio, Texas, and Vermont), this most recent College Board study simulates and quantifies the effect of two possible simplification scenarios on expected family contributions (EFC), Pell eligibility, and state grant eligibility. Specifically, the study focuses on the potential effects of two particular approaches:

• Eliminating all assets from the current federal methodology of determining aid.


• Using only a small number of data elements available from federal income tax returns–adjusted gross income (AGI), federal taxes paid, number of exemptions–for determining aid.

If assets were eliminated, the study showed that:

• EFCs for most dependent students would decline, with the largest decreases occurring among those from higher-income backgrounds. However, these higher-income students are generally not eligible for federal or state need-based grants.


• The impact of removing assets on dependent students’ eligibility for Pell and state grants would be relatively small (the share of FAFSA filers in each state eligible for a Pell Grant would increase by between 1 and 3 percentage points and the proportion eligible for state grant programs would increase by roughly 1 to 2 percentage points).


• Among independent students (both those with and without dependents), eliminating assets from the FAFSA resulted in even smaller changes than occurred among dependent students in terms of their EFCs, as well as their eligibility for Pell and state grant aid.

If only a small number of IRS data elements were utilized, the study showed that:

• The impact of relying only on adjusted gross income (AGI), federal taxes paid, and number of exemptions would be similar to the effect of eliminating assets for dependent FAFSA filers. Large decreases in EFCs would occur only among relatively high-income students who are generally not eligible for federal or state need-based grants.


• The impact of using only a small number of IRS data elements on dependent students’ eligibility for Pell grants would be relatively small (the share of FAFSA filers in each state eligible for a Pell Grant would increase by between 0 and 2 percentage points). Only in Vermont would relying on a small number of IRS data elements affect dependent students’ eligibility for state grants (a 3 percentage point increase). In Kentucky, Ohio, Texas, and Minnesota, there was no effect on dependent students’ eligibility for state grant aid.


• As with eliminating assets, using only IRS data would lead to small changes in the proportion of independent students eligible for Pell and state grants in the five states studied, although there were small differences among independent students with dependents and independent students without dependents.