New Financial Aid Rule A ‘Big Win’ For Students

Ashlynn Profit, MPA, Staff Writer Brief Policy Perspectives

While the Obama administration’s adoption of “prior-prior-year” will simplify the federal financial aid application process for students, it could create more barriers if states and institutions don’t follow.

As the federal government prepares to reauthorize the Higher Education Act, many proposals for simplifying the headache-inducing process of applying for financial aid are on the table. However, President Obama announced a change that could drastically simplify the application process. In October of 2016 students will be able to submit their Free Application for Federal Student Aid (FAFSA) using family income information from two years ago, or the prior-prior-year (PPY). Trachtenberg alumna and current policy director at the National College Access Network, Carrie Warick, says PPY should ease the FAFSA process for students and increase the accuracy of applications.

The Current Process

Currently, if a senior in high school wants to pursue higher education, they can fill out the FAFSA on January 1, 2016, the beginning of their second semester in high school. The form requires students to enter their tax information from the prior year. However, according to Warick, “Most people don’t do their taxes before March 1. And the process becomes difficult for students because a lot of states have a priority deadline for financial aid of March 1, and often give aid on a first-come-first-serve basis.” If students have to wait until their parents file their taxes to apply, they can miss out on financial aid opportunities.

Another option for students is to fill out the FAFSA with estimated tax information, which then requires them to go through a verification process. The summer before school starts, students have to provide their tax transcript. Warick says when many students are asked to provide this information they don’t understand that it’s a new request, and turning in the tax transcript can create another barrier for students.

“Sometimes getting that tax transcript isn’t as easy as it sounds because it’s an official document and you can no longer get it online. It takes up to two weeks for the IRS to mail it to you, and some students may have already begun school by then.”

This process not only causes students miss out on financial aid opportunities, it also forces them to make decisions with imperfect information. By March 1, many students have already applied to schools, but don’t know if they’ve received state or federal aid.

“We found that the timeline of the process is backwards. Students pick their school without knowing what their financial situation is. The process really trips up a variety of students in terms of whether or not they’re applying to schools they can afford.”

The New Process

For the 2017 academic year, students can complete the FAFSA as early as October 2016, rather than in January of 2017. They can use their families’ 2015 taxes instead of waiting for their families to complete the forms for the 2016 year. Warick says this change is a big win for students.

“For new students who will be applying for financial aid before they apply to college, they’ll have their SAR [Student Aid Report] form before they apply for colleges. They’ll know if they’re eligible for a Pell Grant, which is important for low-income students. Both returning and new students are less likely to be pulled for the verification process.”

Not only will PPY make the process easier for students and provide them with aid information earlier, it will also increase the accuracy of their applications.

“Using the current system, students don’t even have their taxes done when they fill out the FAFSA form. With PPY, taxes will be done when the form is available. Students are more likely to be able to use the IRS data retrieval tool, which allows applicants to transfer tax information directly into the FAFSA form. The tool should prevent errors that can cause issues further down the road.”

While PPY is a big win for students, Warick cautioned that if all actors in the field don’t adopt the tool, there could be unintended consequences for students. The FAFSA was created in 1992 as a way to prevent students from filling out the same form more than once because the federal government, states, and institutions all had their own aid application processes.  All states and institutions adopted the FAFSA form, and PPY will only work under these circumstances.

“The federal government does not require states and institutions to adopt PPY, some institutions could create their own processes. We don’t want to go backwards on what we accomplished in 1992 with FAFSA by creating additional barriers for students.”

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