The federal government has streamlined and simplified the FAFSA — the Free Application for Federal Student Aid.
Choosing a college and applying for aid is complicated — so much so that many smart, low-income students don’t make it past the initial hurdles. But last month, the federal government streamlined and simplified the FAFSA — the Free Application for Federal Student Aid, which is the gatekeeper for all federal aid for college, including Pell grants and Stafford loans.
The new approach also opens the door to eventually eliminating the FAFSA altogether.
Under the current aid rules, students planning to attend college next September can’t file a FAFSA until January. They will probably apply later, since the form requires information from their family’s 2015 tax return, which is due in April.
Under this current schedule, information about aid eligibility arrives months after college applications are due — too late to inform the decision about whether (and where) to apply to college. It has become clear that telling students about aid after they apply to colleges — the current practice — is no way to convince nervous students that college can be affordable.
New rules help early birds
Under the new rules, which go into effect next fall, students planning to attend college in September 2017 can file the FAFSA as early as October 2016. They will do so using data from (already filed) 2015 tax returns. This means they have information about their federal aid eligibility as they consider where to apply to college. By filing the FAFSA earlier, they also maximize their chances of getting money from state aid programs that ration aid by giving grants only to those who apply early.
The benefits to this new approach cascade. The earlier FAFSA schedule opens the doors for colleges to speed up their own aid decisions. Aid offers currently arrive in March and April, with students required to make a decision by May. With earlier FAFSA data, college could deliver aid offers much earlier, allowing students to make more informed decisions.
Tax data auto-populates
Nearly all families will now be able to use the IRS Data Retrieval Tool, which automatically populates the FAFSA with tax data from the IRS. Currently this option is available to only about 20 percent of applicants. Under the new rules, all applicants can automatically port their tax data into the FAFSA, cutting back on time spent transcribing data and eliminating data-entry errors that result in application delays. Colleges are now required by the Department of Education to audit millions of aid applications, requiring applicants to send piles of paperwork, including their tax forms. FAFSAs completing using the IRS link don’t require such an audit.
All of the information needed to accurately calculate aid eligibility is already in IRS data. If Congress agrees to eliminate the dozens of nontax questions on the aid application, then the FAFSA would be redundant. The tax return would serve as the aid application, with filers checking off a box to indicate a member of the household is planning on going to college. The federal government could proactively tell families how much aid they can get for college, for example, when they file their taxes.
The FAFSA news arrived not long after the Department of Education released its expanded College Scorecard, which now includes the earnings of every college’s alumni and information about student borrowing and graduation rates.