Fixing FAFSA

MYRNA BROWN, HOST: Coming up next on The World and Everything in It: Fixing financial aid for education.

Congress passed legislation in 2020 that required the Department of Education to simplify its form for the Free Application for Student Aid or FAFSA

PAUL BUTLER, HOST: The department released that updated version late last year—about two months later than the typical FAFSA release date. Education advocates said the delay complicated the admissions process for millions of students.

Going into the Fall, have those issues been resolved, or will families endure another round of problems?

Joining us now to talk about it is Tim Rosenberger…he’s a legal policy fellow at the Manhattan Institute, where among other issues he researches education policy.

Tim, good morning.

TIM ROSENBERGER, GUEST: Good morning.

BROWN: Well let’s start at the beginning. What problems was Congress trying to fix when it told the Department of Education, “simplify the form?”

ROSENBERGER: So, Congress was looking at a really complicated higher education funding landscape. They knew they had these big, federalized loan programs that were pushing tons of money out. Repayment on those wasn't going particularly well. They had a Pell Grant program that was not quite funding all the students who seemed to be eligible. They had a work study program that students seem to like, but maybe should be expanded. And so, they were trying to figure out how to take a form that hadn't been changed in decades, and have it develop numbers for what families should contribute towards higher education that were better aligned with where families are today. And they wanted to be less complicated. The old FAFSA was pretty long. The new FAFSA is a good way shorter. It asks for less information. In theory, a shorter form, looking at fewer things, would put out numbers that were more equitable and were more similar for students across different circumstances.

BROWN: Sounds like an easy enough plan. So why did the new process cause so many problems for students and the schools they were applying to.

ROSENBERGER: Well, there were several problems with it. First, the tech wasn't so good. So the actual filling out the form, getting it to your school, having your school use it to build your aid package, the IT to do that wasn't quite working. That bugginess seems to have mostly been fixed.

As a secondary matter, the changes that simplified the form weren't particularly well thought out. By asking fewer questions about what kinds of different assets your family had, it grouped things together that we probably really wouldn't think of as the same. So for example, if your parents had just a bunch of money sitting in their checking account, it would think of that in a very similar way to how it might think about the stock and trade and vehicles and things like that they used for a small business. So if you think about it, you know, a family that's been saving money for something like college and a family that's been building a business like, say, a plumbing business or a roofing business, those both are no assets, the implication of this would, of course, be sell part of your family business to pay for your student's education. That that doesn't quite work.

It also looked at families a different way, and most problematically, it considers people married to students' parents, their income and assets as things that can go towards those students education costs. So you think about it, this could be someone who marries your parent well after you're out of the house, their assets, their money now is considered something that can pay for your college education, and a lot of families don't quite think of it that way. That's not sort of the reality on the ground, but that is how the FAFSA thought of it.

And finally, it got rid of the division by students in college used to be there was a family contribution and expected familial contribution, and that was divided among the number of students who would be attending college that's been done away with it now calculates per student, and it doesn't do that division. So a family with 2, 3, 4 students pursuing higher education at the same time now can have a very strange number where we're a big number like 4x the amount of money that anybody reasonably could think they could spend on college in one year now is expected to be given by them to all these various schools, and that doesn't quite work.

BROWN: Along with that, earlier this month, the Department of Education announced that this year's form won't be available until December 1. What concerns you most about this new delay?

ROSENBERGER: Well, the concern that this tells us that things aren't really buttoned up. So we saw last year, students filled out the form with their parents. They sent it in. It did or didn't work at all. Assuming it did work, their school then had to try to work through it to build them an aid package, and those aid packages came in really late. Now this is a big problem, particularly for new students, because they don't know what their package is gonna look like. They don't really have a sense what it's gonna be, and they can't make an informed decision about what program to pursue. They don't know what they're going to be offered in terms of loans, in terms of grants, in terms of work study.

So, all that happened last year. You fear it'll happen again this year, and the fact that we're sort of already delaying suggests there are some big bugs in the system. If it comes out December 1, that that's probably okay. If it comes out and it works, because when people really have the time to fill this out, is Christmas break, right? If it can be filled out in work during that break, this fixes a lot of problems that didn't happen this year for most students. So one hopes it will, but, but still, we're a little late, and that's worrying.

BROWN: Okay, final question, what do you think Congress would have to do to fix this problem?

ROSENBERGER: Well, I think there are a couple things. There's sort of the immediate term fixes that one could do, and that would look like bringing back the ability to divide by the number of students in school, bringing back the exemption for small businesses and for more assets so that families that have small businesses, particularly the trades, aren't expected to liquidate, like a family run plumbing business to find college for their students.

There's probably a broader thing that needs to be done that I think this initial change came from, where we say, How are students really going to pay for college? Do we really think that the answer is these federal student loans? Because it all seems like sort of a joke, right? The FAFSA is somewhat an artifact of a system that says we're going to have these sort of comically large amounts of money that aren't really going to ever be paid back by students, probably, maybe.

And so using congressional action to better tie funding to actual student outcomes to make college more affordable on the front end, you know, something that's sort of clear and rational on the front end of funding higher education probably obviates a lot of the problems you have with a Byzantine FAFSA.

BROWN: Tim Rosenberger is a legal policy fellow at the Manhattan Institute. Tim, thank you for your time.

ROSENBERGER: Thank you.

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