Lamar Alexander and Michael Bennet step up on student aid reform

Reuters

Senator Lamar Alexander (R-TN) (C) talks with reporters following the weekly Republican caucus luncheon at the US Capitol in Washington June 18, 2013.

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Article Highlights

  • The Alexander/Bennet plan would reduce the number of FAFSA questions to just 2

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  • Failure to file the FAFSA on time can derail students who would benefit from college

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  • Getting rid of the FAFSA won’t fix higher education—far from it. But it’s progress.

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After all the political posturing over Elizabeth Warren’s student loan refinancing stunt, I’d forgive you for feeling pessimistic about the prospects for substantive student aid reform in an election year.

But on Thursday, a bipartisan pair of senators may have proven us cynics wrong. Lamar Alexander (R-TN) and Michael Bennet (D-CO) introduced a bill that would eliminate an albatross that’s been around the neck of federal student aid policy for decades—the long, tedious Free Application for Federal Student Aid (FAFSA). Today, any student who wants to receive federal or state aid must fill out a FAFSA each year they enroll in school. Despite efforts to shorten it, the form is still over 100 questions long, designed to collect detailed information about income, savings, assets, and family situation. The Alexander/Bennet plan would reduce the number of questions to just two: what was your household income two years ago, and how big is your family size.

Allowing families to use their income from the “prior-prior year” also solves timing problems inherent in the current process. FAFSA requires information about the family’s prior year income, drawn from their tax return. Taxes are due April 15, but by then the college application process is already underway. Some aid programs are “first-come, first serve,” meaning families who wait to file their taxes until April may miss out on these early-bird grants. And if tax filing is delayed too long, students might miss out entirely. Using prior-prior year income would relax these timing pressures and allow students to find out what aid they’re entitled to much earlier in the process.

The Alexander/Bennet bill calls for other changes.  It would give families a simple “look-up table,” enabling them to learn about their aid eligibility during their student’s junior year. It would also consolidate different federal loan programs for undergraduate students into a single program and allow students to use Pell Grants year-round. And the bill would reduce the number of options for loan repayment to just two (10-year and income-based) and pro-rate loan limits based on a student’s enrollment intensity (part-time enrollment = part-time loan).

But the provisions eighty-sixing the FAFSA are the most far-reaching. Why should we care? Because clunky and poorly-timed government application processes can depress participation rates among the very people the programs are designed to help. In this case, failure to file the FAFSA on time can derail qualified students who would otherwise benefit from postsecondary study. To the extent those students could have been successful, it’s a net loss for them and for society as a whole.

This happens to be the theme of a paper we (serendipitously) released Wednesday.  In it, my co-authors and I describe the challenging blend of information problems, procedural hurdles, and myopia that prospective college students face. The paper draws a clear distinction between two different types of “bottlenecks” (to borrow law professor Joseph Fishkin’s term) on the path to postsecondary education:

"Some of the bottlenecks on the path to postsecondary education sort individuals according to knowledge, skills, and abilities: reaching a college-ready standard, learning necessary content and skills, and passing required courses. But other bottlenecks sort people on more arbitrary grounds: can you fill out a complex government form to apply for financial aid, or did you sign up for classes early enough to get the courses you need to graduate on time? For college degrees to have value, the former set of bottlenecks must exist. But the same is not true for the latter. Reducing the bureaucratic hoops that students must jump through—by, for instance, simplifying the federal financial aid application—would help ensure that students who are sufficiently prepared and driven to succeed do not get locked out on procedural grounds while leaving the academic sorting process intact."

Foremost among the procedural bottlenecks is the FAFSA. As we describe in the paper:

"At 116 questions, the simplified 2011–12 version of the form was barely shorter than the IRS 1040 form (127 questions), and significantly longer than both the 1040EZ (38) and the 1040A (84).48 Officially, the Department of Education suggests that it takes 75 minutes to read the instructions, gather needed materials, and complete the form but researchers estimate the actual length is closer to 10 hours."

Not surprisingly, there’s been a lot of interest among researchers and policymakers in simplification, and we’ve made some limited progress: fewer questions, better skip-logic, and the ability to pre-populate the form with IRS data. But these policy changes amount to putting lipstick on a pig; even if you shorten a burdensome application process that’s poorly timed, it’ll still be burdensome and poorly timed.

Today’s bill from Senators Alexander and Bennet could be a major step forward. Of course, the shift to a “postcard-sized FAFSA” and use of prior-prior year could cost taxpayers more than the status quo. This is part of the reason the bill would also do away with subsidized Stafford loans. Keep an eye on how the Congressional Budget Office scores the bill, as anything that adds to the deficit will be tough for Alexander’s fellow Republicans to swallow.

For now, though, the big takeaway is this: after years of partisan political stunts, pandering handouts, and a discouraging lack of substance in student aid policymaking, Alexander and Bennet have stepped up to solve a tractable problem. Getting rid of the FAFSA won’t fix higher education—far from it. But it’s progress.

 

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