Is a Simplified Student Financial Aid Process Around the Corner?

The Fix Would be a Rare Bipartisan Moment

By guest author Richard Vedder
February 19, 2019

Literally for decades, a major impediment for individuals wanting federal student financial assistance is the Free Application for Federal Student Assistance (FAFSA) form. I remember in about 2008 sitting in an interminably long meeting with Education Secretary Margaret Spellings and underlings trying to simplify a form over 100 questions long and hideously complex. My wife, a retired high school guidance counselor in a low-income Appalachian setting, told me the FAFSA form scared off many low-income students seeking financial assistance. Some academic research has said the same thing. More than a decade has passed and the problem of the FAFSA form still remains, no doubt reflecting federal bureaucratic inertia and infighting.

On December 20, the U.S. Senate unanimously passed legislation, dubbed the FAFSA Act, helping achieve rationality in applying for federal assistance by permitting the Internal Revenue Service to share tax information on applicants for aid directly with the Department of Education. Notable in this era of hyper-partisanship: the bill was co-sponsored by two liberal Democrats, Patty Murray and Sheldon Whitehouse, and two conservative-to-moderate Republicans, Lamar Alexander (chair of the Senate Education Committee and a former president of the University of Tennessee) and Cory Gardner. In today’s extremely acrimonious environment, when Senators as diverse as Ted Cruz and Elizabeth Warren can agree on something, it is notable. The legislation must pass the House, where hopefully its merits will overcome partisan bickering or maneuvering that might keep the bill off the House calendar.

If I recall from the 2008 meeting, University of Michigan Professor Sue Dynarski and I argued that the FAFSA form provides very little important information not available on federal income tax forms. Income is the predominant determinant of financial need, although tax returns also provide other useful information, such as the number of children of college age in the family. The marginal gains from other information provided by the FAFSA, such as family assets, mortgage payments, etc., are outweighed by the barriers created by form complexity. Students should be able to apply for federal student aid by signing a simple postcard-sized form that says “by signing this form, you understand that your income tax returns will be provided to the U.S. Department of Education for purposes of determining eligibility for federal student financial assistance; please provide your Social Security (Taxpayer Identification) number and sign the enclosed form.”

This should eventually open up the use of IRS data in other ways which could provide enormously useful consumer information without invading the privacy of individual taxpayers. In particular, data on the financial success of students by school attended and academic major would be great. Some information is already provided and published on the College Scorecard of the U.S. Department of Education, but it excludes a large number of students who have not applied for student aid. Why can’t the IRS provide income data for ALL students based on Social Security numbers provided them by the relevant colleges?

Some regular readers of this space might be puzzled: hasn’t this blogger argued that federal student aid programs are disastrous, largely responsible for the sharp increase in the cost of college to consumers? That is true, and in a perfect world, we would quickly phase out or drastically reduce federal financial aid in favor of better alternatives. Indeed, if I had my way, we would abolish the U.S. Department of Education. But we have a highly imperfect world, and the political process is certainly not producing optimal results these days. If we are going to have a substantial federal presence in financing a college education then we should reduce barriers to student participation in the program. That is why I suspect that even the bitterly partisan and rancorous U.S. Congress might be able to get its act together and pass this legislation.

Republished from the Independent Institute. Originally published by Forbes.