FAFSA Simplification: Be Careful What You Wish For

This past summer, Sen. Lamar Alexander (R-Tenn.) along with Sen. Michael Bennet (D-Colo.) stood before a packed room of Capitol Hill interns as they unveiled  bi-partisan legislation sure to be well-received among the college-aged crowd. On every seat was a mock-up of their proposed new Free Application for Federal Student Aid (FAFSA) that was so simple, it fit on a postcard.  For years Senator Alexander has literally held up the current ten-page FAFSA taped together, arguing that such undue complexity reduces college access. So what if, the Senators asked the interns, the FAFSA was reduced to just two questions about family size and income? It may have been partly due to the free pizza offered to the interns, but the reception among them was enthusiastic. They were an easy crowd.

Sen. Tom Harkin (D-Iowa) apparently has been harder to win over. Last week, Harkin, the current chair of the Senate Health, Education, Labor, and Pensions (HELP) committee, unveiled a bill to reauthorize the Higher Education Act, which didn’t include any mention in its nearly 900 pages of putting the FAFSA on a postcard.

If FAFSA simplification has received such a positive response, why didn’t Harkin include it in his Higher Education Affordability Act (HEAA)? Maybe it’s because radically simplifying the FAFSA will lead to a lot of unintended consequences for students.

Over the past few years, the U.S. Department of Education has already been simplifying the FAFSA. The Department has reduced the amount of questions, employed skip logic for the online FAFSA, and introduced an IRS data retrieval tool (DRT) to help auto-populate a significant portion of the form. These efforts have helped to significantly reduce the average time students and families take to complete the application (from 34 to 23 minutes).  Instead of the ten-page, 100-question form that Alexander uses as a gimmick, most students fill out the FAFSA online and never see nearly that many questions. If they use the DRT, the process is even more automated.

The more worrisome byproduct of this recent FAFSA simplification, however, is the increasing institutional adoption and reliance on alternative financial aid applications like the College Board’s CSS PROFILE. The PROFILE is a much more complex form than the FAFSA, with more than 160 questions. It’s also expensive, costing students $25 for the first college listed, and $16 for each additional college.

Part of the reason the FAFSA became required for federal aid in 1992 was to prevent individual institutions from demanding different applications for financial aid. These individual forms created a high barrier to entry for students who needed financial aid to enroll. If we radically simplify FAFSA any further it will lead us right back to the problem we had before. Widespread adoption of pricey and complicated alternative financial aid applications will likely re-erect the barriers to financial aid that advocates have tried so hard to disassemble over the years.

There is one area of simplification that Harkin and Senators Alexander and Bennet agree on: using Prior-Prior Year taxes for the completing the FAFSA. This would be a bigger win for students than reducing the FAFSA to a postcard.

Right now, many students face institutional and state deadlines for financial aid as early as February or March. This means families have less than a couple of months to fill out their taxes in order to be able to fill out FAFSA and be eligible for this aid. Even if they do manage to file their taxes by February, there is lag time between when the IRS receives taxes and when the DRT can populate the FAFSA.

By using Prior-Prior Year taxes to determine aid eligibility, FAFSA would be easier to submit. Students could send their financial aid applications much sooner, more in line with the academic year than with the tax year. The timing for the DRT would be better, allowing most families to use it, thereby reducing complexity and error. With PPY in place, policymakers could focus on ensuring the DRT is the prominent option for completing the FAFSA.

Since Harkin is retiring in January, HEAA is seen largely as a symbolic piece of legislation. Alexander is set to take over as chair of the HELP committee, and he has said he will look to start from scratch on reauthorization. Instead of focusing on reducing the FAFSA to a postcard, he should continue to embrace the move to using Prior-Prior Year taxes for financial aid determination. Students deserve real FAFSA simplification that won’t create a market for pricey, complicated third-party financial aid applications.