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The FAFSA effectively serves as the gateway to higher education for millions of students each academic year. However, the complex and extensive nature of the FAFSA has resulted in significant underutilization of federal aid. In fact, just 61% of high school seniors complete the application by the time they graduate, leaving $24 billion in federal aid unclaimed. Moreover, a significant portion of students initially file an application, but fail to enroll in a higher education institution.
As illustrated in the below figure, only 31% of low-income students enroll in higher education with the assistance of a Pell Grant, suggesting that this issue disproportionately affects low-income students. NCAN's research demonstrates that this is indeed the case. Thus, the evidence is clear: Federal policymakers must simplify the FAFSA as a means to expand access to higher education.
Streamlined FAFSA: A Path to Greater College Access
NCAN’s simplified FAFSA model, the Streamlined FAFSA, has been proven to improve filing outcomes. This tested model minimizes burden for students, meets the needs of institutions, eliminates excess, and maintains universality. An updated FSA ID, increased efficiency of the IRS DRT, and the exclusion of duplicative questions yielded largely positive results when the Streamlined FAFSA was put to the test. The three pathways within this model have been proven to:
Overall, the Streamlined FAFSA will provide low-income families with the financial and emotional relief they need when preparing for college. Increased transparency will ensure that families who receive a federal means-tested benefit that their student will qualify for a maximum Pell Grant. Those who do not will benefit from a smoother and less difficult application process. This efficient methodology will result in a 5.1% increase in Pell expenditures. Moreover, such newfound efficiency would undoubtedly increase awareness of the federal aid that lies at the fingertips of prospective college students. Please see below for additional resources and ways to engage in the FAFSA simplification conversation.
FAFSA Verification: A Key to Streamlining the FAFSA Process
Each year, after completing the FAFSA, millions of students are flagged for an audit-like process known as verification, in which they must submit additional documents to prove the accuracy of the information included in their financial aid application. This process aims to reduce improper payments made by the federal government.
But verification unintentionally and quietly wreaks havoc on financial aid applicants, particularly low-income students. While the federal government flags about 30% of all aid applicants for verification, it selects roughly half of all low-income applicants. And low-income students are frequently stymied by the verification process, Some obstacles include obtaining and completing different forms if they are applying to multiple schools, long waits for mailed IRS documents, and painful visits to records offices for death certificates. These barriers lead to "verification melt," or a failure to complete the verification process that derails a student’s receipt of a Pell Grant and other financial aid.
Only 56% of Pell-eligible students selected for verification actually complete this review process and go on to receive a Pell Grant. In comparison, among Pell-eligible students not selected for verification, 81% ultimately receive a Pell Grant. This represents a 25 percentage-point melt.
To learn more about verification, check out "FAFSA Verification: Good Government or Red Tape?" which outlines what verification is, who is selected for verification, and the consequences selected students may face. It also offers a number of policy recommendations to lessen the negative effects of FAFSA verification and help more students access financial aid.
The Department of Education can take steps to drastically reduce the burden FAFSA verification places on students by, for instance, allowing students to submit a tax return instead of a tax transcript to verify income data, eliminating the need for non-tax-filers to provide proof of their non-filing status, and publishing an annual report about verification to increase transparency around the process.
Congress could implement the Streamlined FAFSA discussed above, allowing for a more seamless process less in need of verification than the current FAFSA, or Congress could change the Internal Revenue Code to allow for direct information sharing between the Departments of Treasury and Education.