Makin' Money

Don’t know much about FAFSA

Chris Farrell Jun 29, 2011

To get financial aid to help pay for college you have to fill out the Free Application for Federal Student Aid or FAFSA. It’s a complicated form despite recent efforts to streamline it. The financial aid system that developed in the post World War 11 era was initially modeled after the U.S. progressive income tax. Over the years, like the tax code, it has evolved into a messy stew of rules.

A favorite story of mine about FAFSA comes from Thomas Kane, one of the nation’s leading education economists. He worked at the White House Council of Economic Advisors during the Clinton Administration. The head of the Council at the time was Joseph Stiglitz, a Nobel laureate and brilliant scholar. Kane recalled walking into Stiglitz’s office, finding him surrounded with papers, looking extremely frustrated. What was up? A recession in the making? The details of fiscal policy? No, Stiglitz was struggling to make sense of financial aid forms for a college-bound child. “Imagine how bad it is when the process confuses someone like Stiglitz?” Kane said.

The complexity of FAFSA is a barrier to college–an unnecessary one. A survey from the research firm Public Agenda found that one of the “most startling and probably one of the most crucial gaps in knowledge concerned FAFSA”.

While nearly 7 in 10 college graduates were familiar enough with the term to know that it involved financial aid, fewer than 3 in 10 high school graduates recognized it. For many organizations working to expand access to college and increase college completion, making sure that young people complete the FAFSA is job number one. It’s the first step to getting a Pell Grant or federal loan, so students who don’t complete it miss out on that form of help. It is also used by colleges and universities to determine eligibility for institutional financial aid.

The problem with FAFSA is largely with low-income families. FAFSA’s complexity plays a role in the long running and highly disturbing gap in college attendance between students from high income families and students from low income families. In The Role of Simplification and Information in College Decisions: Results from the H&R Block FAFSA Experiment (NBER Working Paper No. 15361), scholars Eric Bettinger, Bridget Terry Long, Philip Oreopoulos, and Lisa Sanbonmatsu make the case that simplification and counseling together could boost college attendance and aid, especially among low income students.

I wrote about this study here. In essence, the scholars targeted families unlikely to know about much about college and financial aid. The professional tax service H&R Block participated in the experiment. Tax professionals helped low- to moderate- income families complete FAFSA. The families were given estimates of their eligibility for government aid. They were told about schooling options. A randomly-chosen group only got personalized aid-eligibility information.

The students who got professional counseling about FAFSA from professionals at H&R Block professionals were 40 percent more likely to apply for financial aid than the information-only control group. The submission rate of aid applications almost tripled for independent students with a high school degree but no college education.

Information is good. It isn’t enough.

A more radical solution for dealing with FAFSA’s complexity was proposed in an earlier blog post by William & Mary economists Robert B. Archibald and David H. Feldman–authors of *Why Does College Cost So Much?. *

Get rid of FAFSA. Instead, they advocate creating a universal benefit modeled after Georgia’s HOPE program. It pays the tuition and fees at all public institutions in Georgia to which any resident high school student with a “B” average has been accepted. Take the program nationwide, they say.

Sounds good to me.

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