Simplifying Student Aid: Report Proposes Cutting Red Tape to Increase Access to Financial Assistance

Aug 09, 2010

The Institute for College Access & Success recently released a report examining how the financial aid process affects college participation rates. While they agree that simplifying the FAFSA is a crucial first step to increasing college access, the report focuses on the oft-ignored burden that post-FAFSA paperwork places on low-income students and the roadblocks it creates to getting access to badly-needed aid.

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Drowning in Paperwork

Paperwork can stop a lot of people from getting financial aid, particularly those who need it most. According to a recent study by the College Board, only 58% of Pell Grant-eligible students at community colleges and 77% of those at 4-year universities applied for federal aid in 2007-2008. Pell Grants are federal grants available to low-income students, so that means that 42% and 23% of low-income students at community colleges and 4-year institutions, respectively, failed to apply for aid.

What is preventing these students from seeking financial assistance? According to the College Board, lack of education and outreach is at the core of the problem. The process is confusing and complex, and many students either don't know that there are resources available to them, or simply get too frustrated to complete the process. As a result, many organizations have called for reducing the length and complexity of the FAFSA to make it easier to apply for aid.

According to a recent report from the Institute for College Access and Success (TICAS), simplifying the FAFSA would only address part of the problem. After the Department of Education receives students' FAFSA forms, they flag some applications for verification. This requires students to both resubmit and provide documentation for some or all of the information they provided on their FAFSA. Gathering this information can be a burden for most students. Because almost all flagged applicants flagged are potential Pell Grant recipients, verification can be an insurmountable obstacle for many - as the College Board pointed out, Pell-eligible low-income students tend to have the fewest resources and least support for the financial aid application process. As a result, many low-income students are denied federal aid, which can lead to them taking on large private loans or even dropping out of school altogether.

Financial Assistance

Verification Blocks Needy Students From Receiving Aid

For the current study, TICAS reviewed financial aid application information from 13 community colleges in California. After collecting data from all of the schools, they were able to analyze anonymized records for almost 60,000 financial aid applicants. They also interviewed financial aid administrators and surveyed students who had submitted FAFSAs and appeared to be eligible for Pell Grants, but never completed the full process.

The financial aid records revealed that only 2% of verified applicants became ineligible for Pell Grants, but those selected for verification were much less likely to receive grants than those who were not selected. Their analysis indicated that, in those 13 colleges alone, about 1,200 additional students would have received grant aid if those selected for verification received grants at the same rate as those who were not selected.

These findings support the organization's assertion that the verification process provides a significant stumbling block. If verification were simply working to weed out applicants who weren't actually eligible for Pell Grants, then the percentage of applicants denied after verification would be commensurate with the number of students who fail to receive aid. Instead, it appears that many applicants are simply failing to finish the verification process.

Financial aid administrators, who are closest to the application process, agreed with this conclusion. When interviewed, almost all financial aid administrators identified additional requirements beyond the initial FAFSA application as the primary reason that many Pell-eligible students don't receive aid. They felt that this was a much better explanation than widespread errors or attempts by applicants' to commit fraud on their initial applications.

The results of the student survey also supported TICAS's conclusion. Sixty-two percent of those surveyed who had not completed the application process either didn't know the status of their application or were under the misimpression that it was complete. Of those respondents who knew their application was incomplete, 15% didn't know what to do to complete it. It's clear that a lack of understanding of the verification process is preventing many Pell-eligible students from receiving aid.

Filling Out Forms

The obstacles created by the verification process aren't just a burden on students. Colleges spend incredible amounts of money to verify students - TICAS estimates that the 13 colleges in their study spent between $1.7 and $2.5 million on FAFSA verification in the 2007-2008 school year. Furthermore, tax payers have a vested interested in seeing the federal government use 'sensible verification policies,' since $29 billion in federal dollars were spent on Pell Grants in the 2009-2010 school year alone.

TICAS offers several recommendations for alleviating this burden. For colleges, they suggest several practical steps that can improve education and ease the process:

  1. Reduce steps not required by federal or state regulations. Many schools require students to complete additional steps, such as verifying driver's licenses, that provide unnecessary extra hurdles.
  2. Don't verify more students than necessary. Although federal regulations currently cap the percentage of flagged students who have to be verified at 30%, almost all colleges and universities attempt to verify every single student who is flagged. This adds a lot of cost for schools and increases the number of students who are less likely to get aid.
  3. Review financial aid communications from a student-centered perspective. Schools need to retool many of their financial aid letters and emails to provide more encouragement and useful information to help students through the process. These communications provide financial aid offices with a key opportunity to offer better education and guidance.
  4. Provide adequate funding for financial aid offices. TICAS highlights a problem that was also brought to light by the College Board: Schools tend to underfund financial aid offices, which results in them being understaffed and unable to offer the personal attention often required by students struggling through the application process.

Of course, these suggestions won't fix the problem by themselves. The federal government also needs to make some policy changes to simplify the process. Noting a recent proposal by the Department of Education to remove the cap on the share of flagged applicants who have to be verified, TICAS argues that retaining the cap is key for reducing the problem.

TICAS also recommends that the Department expand a new pilot program that allows select students to electronically transfer data from their 1040 income tax forms to their FAFSA. Not only would this improve information sharing between the IRS and the Department of Education - the FAFSA asks for a lot of information that the feds already have - it would simplify the verification process. If the information on the FAFSA was already linked to students' income tax forms, then these forms would not need to be resubmitted for verification.

Ultimately, the complexity of the financial aid process hurts those who stand to benefit from the most from federal aid: Low-income students who lack the resources and support to navigate the system. By simplifying and streamlining the process, institutions and the federal government could make significant strides toward increasing college access for everyone.

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