FAFSA, the Perfect, and the Good

Like many a politician, Education Secretary Arne Duncan is at his best when he’s talking off the cuff.

"This damn form was killing us," Duncan said to a small group of reporters after a more formal presentation Wednesday to the White House press corps about the Obama administration’s plan to simplify the Free Application for Federal Student Aid. He was talking about how big a deterrent the federal form was to getting students from low-income families to apply to college, when Duncan, as superintendent of Chicago’s public schools throughout this decade, was trying to increase the district’s college-going rates.

In part because of the FAFSA’s multiple pages and scores of questions seeking personal and financial information about students and their families, many policy experts believe, hundreds of thousands of potential recipients forgo many millions of dollars of federal college aid each year.

That, plain and simple, is the reason why so many higher education analysts — and both of the last two presidential administrations — have made "simplification" of the financial aid form a major priority. (It’s also something that can be done without a huge financial cost, something that can’t be said about too many things in this town these days.) The Obama administration has put increasing Americans’ rate of college going near the top of its agenda for economic recovery and progress, and that political imperative is creating movement on the idea of simplifying the financial aid process where it has been hard to come by previously.

But the previous inertia has resulted in part because there are potential downsides to FAFSA simplification — most notably if information the government collects through the form is narrowed so much that states and colleges no longer have confidence in its validity and fairness — and the ultimate success of the Obama/Duncan plan will depend in part on how successfully it avoids such pitfalls.

As Duncan and the Education Department trumpeted the proposal Wednesday with the high-profile appearance at the White House, along with IRS Commissioner Doug Shulman, the information they provided left many details to be determined. It seems clear, though, that as with many policy initiatives important to Obama, the administration seems intent on making forward progress even if it can’t go as far as some think it should. "Don’t let the perfect be the enemy of the good," Obama has taken to saying about health care and other matters, and the administration’s approach on FAFSA simplification seems to follow that approach, too.

As Duncan laid out the plan Wednesday, the Education Department will, right now, make several changes that do not require Congressional approval. This summer, the department will take advantage of existing technology on the Web-based FAFSA to allow married or independent students to skip questions about their parents, among others. In January, the department will stop requiring students with low incomes to answer questions about their financial assets, and only returning students will be asked about prior drug convictions, since the question does not affect first-year students. Department officials said they would work closely with state officials to set up the electronic form to "make it easier to answer questions that the states need but the federal government does not."

January will also mark the start of the department’s test of a system to allow students who apply for aid for the spring 2010 semester to retrieve relevant tax information from the Internal Revenue Service to help them complete the online FAFSA. "When you’re online filling out the FAFSA, there’ll be a button that says, ‘Want to go get your IRS data?’ " said Shulman of the IRS.

Education Department officials say that the test will see whether the process of using IRS data to populate the FAFSA is workable, and that by focusing on students applying in the spring, they can postpone the thorny question of whether to use year-old tax data — which creates potential challenges for financial aid officers and students alike when families’ financial fortunes change significantly. "We haven’t yet made the decision about whether to go to ‘prior prior year,’ " said Robert Shireman, deputy under secretary of education. "This will allow us to give the system a shot, and look at the prior prior year question later." About half of financial aid applicants — those who attend college in the spring and many community college and other students who apply for aid late in the summer, right before the fall semester starts — should be able to populate their FAFSA forms with current year data from the IRS, he said.

Other changes the department seeks would require Congressional approval. Department officials said they would ask Congress to eliminate a total of 29 questions about students’ and families’ finances that are not on the federal tax form. Several of those relate to families’ assets ("As of today, what is the net worth of your (and spouse’s) investments, including real estate (not your home)?"), and eliminating the consideration of assets for most students by abandoning those questions would be among the more controversial steps the Obama plan calls for.

Most states and many private colleges now use the federal needs analysis methodology to decide how to allocate their own financial aid. While a panel of experts convened by the College Board last year called for determining financial need based solely on families’ adjusted gross income and number of dependents, some college officials worry that states and colleges might stop using the FAFSA — and require students to fill out other forms to apply for state or institutional aid — if they no longer believe the federal form gives them sufficient information on which to base their decisions.

"The question is whether states and institutions will consider this [revised FAFSA] reliable enough," said Sarah A. Flanagan, vice president for federal relations at the National Association of Independent Colleges and Universities. "Better a four-page federal form that gets low-income students state, institutional, and federal aid than a one-page federal form that means that students lose state and institutional dollars."

Shireman said that if Congress went along with eliminating more than two dozen questions, the department would base its assessment of students’ financial need on the 18-20 financial questions that are also on the federal tax form — and a spokesman said the department would ask Congress to drop the consideration of assets for families with assets of $100,000 or more. "Most filers would not have their assets counted," Shireman said.

Flanagan said she was heartened that department officials seemed to be inclined to experiment with various moderate approaches to changing the federal form. "The key is to strike a balance," she said, between knocking down barriers for low-income students and sustaining the FAFSA in a way that is credible.

But others said the department was being too timid. "It’s a step in the right direction, but much more simplification is needed," Mark Kantrowitz, who runs Finaid.org, said in an e-mail message. "The current proposals cut one page from the six page form by prefilling with income tax return data. But to have a meaningful impact on application rates it is necessary to fit the FAFSA on a postcard. That means simplifying the formula, not just the form."


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