Fact Sheet: Making College More Affordable by Simplifying the Student Financial Aid Application

"I'll simplify the financial aid application process so that we don't have a million students who aren't applying for aid because it's too difficult." – President Barack Obama

America's future economic strength depends on the quality of our education. Countries that out-teach us today will out-compete us tomorrow. President Barack Obama is calling for America to once again lead the world in college graduates. He has proposed nearly $200 billion in new scholarships and tax credits for college tuition, and Vice President Joe Biden is examining new ideas for college affordability through his Middle Class Task Force.

Today, U.S. Secretary of Education Arne Duncan outlined another key component of the Administration's higher education agenda: its plan to simplify the Free Application for Federal Student Aid (FAFSA). The form imposes a needlessly difficult obstacle in the path of 16 million college students and their families each year. Each student is asked as many as 153 questions, most of which have little or no effect on actual financial aid packages. Experts believe that the difficulty of the application and unpredictability of the aid awards undermine student aid's ability to reach students who are unsure whether they can afford college. And there are 1.5 million enrolled students who are probably eligible for Pell grants but failed to apply.

In the coming months, the Departments of Education and Treasury will work together to simplify the financial aid process by modernizing the online application, seeking legislation that will eliminate unnecessary questions, and creating an easy process for students to apply by using tax data already available. The end result will be an application that requests only easily obtainable personal information. Students will be able to complete an application with only basic, personal information and a few clicks of their mouse.

THREE STEPS TO A SIMPLER APPLICATION

Today, Secretary Duncan is announcing (1) a shorter and simpler online application that skips unnecessary questions, (2) legislation to remove more than half of the financial questions, and (3) a web application that will let some families easily answer the remaining financial questions with data from the Internal Revenue Service (IRS).

FIRST: Overhaul the Online Application. The Department of Education is making a series of improvements to the online application. Although 98 percent of students apply online, much of the online form simply reproduces the paper version rather than taking advantage of the interactive potential. Improvements to the form–which will eliminate 250 million questions a year--include:

•      More Information: Since May, the Education Department has provided students instant estimates of Pell grant and student loan eligibility, rather than forcing them to wait weeks, and a link to more college information such as graduation rates.

•      Skip Irrelevant Questions: Starting this summer, the Education Department will allow students who are at least 24 or married–who are automatically exempted from providing their parents' financial information--to skip the remaining 11 questions intended only to determine whether parental information is necessary. Other improvements will allow men older than 26 to skip the question about Selective Service registration and consolidate the three questions on homelessness.

•      More Improvements in January: A series of additional improvements will be implemented in January. Students with low incomes will no longer be asked for asset information, which is not used to determine their aid eligibility. Only returning students will be asked about prior drug convictions because the question does not affect first-year students. And the Education Department will work with state agencies to make it easier to answer questions that the states need but the federal government does not.

SECOND: Eliminate Questions through Legislation. Applying for financial aid is far more complicated than filing a tax return; students and their parents must answer as many dozens of questions about their income and assets that are not on the federal tax form. These questions are often difficult to verify, and they add very little to the rest of the aid formulas. The six questions related to assets, for example, only affect the awards of 3 percent of Pell grant recipients, while penalizing those families for saving for college and opening up loopholes for sophisticated applicants to game the formula.

Today, Secretary Duncan called on Congress to let students and families apply for financial aid with the information on their tax returns, without needing to gather bank statements, investment information, and documentation of any untaxed income. These changes would make the student aid application simpler and fairer, and they would open the door to using IRS data for the remaining financial questions, reducing the FAFSA to easy personal questions.

THIRD: Answer the Remaining Financial Questions with Tax Data. When applying for student aid, more than 90 percent of students and families are giving the federal government information it already has–information they provided when they filed their taxes. The answer to up to 20 financial questions–all questions that will remain if the proposed legislation is enacted–could be provided by the IRS. Students applying online will only need to provide easily available personal information.

Beginning in January, students applying for financial aid for the spring semester will be able to seamlessly retrieve their relevant tax information from the IRS for easy completion of the online FAFSA. The Departments of Education and Treasury will be working together to examine the possibility of expanding this option to all students in the future.

THE OBAMA-BIDEN AGENDA FOR COLLEGE AFFORDABILITY

The simplification initiatives announced today build on President Obama's accomplishments and commitments to higher educational opportunities, including:

•      Setting Ambitious Goals for America: President Obama has asked every American to commit to at least one year or more of higher education or career training to help meet a new national goal: by 2020, America will once again have the highest proportion of college graduates in the world.

•      Expanding Pell Grants and College Tax Credits: The Recovery Act increased Pell Grants by $500 to $5,350 and created the American Opportunity Tax Credit, a new $2,500 tax credit for four years of college tuition. The President's 2010 Budget proposal would make these policies permanent and ensure the Pell Grant continues to grow steadily by making it an entitlement. Together, they provide approximately $200 billion in college scholarships and tax credits over the next decade.

•      Modernizing and Expanding the Perkins Loan Program: The President's 2010 Budget proposes to make this vital program available to over 2,600 additional schools and an estimated 2.7 million additional students each year. By providing an additional $5 billion in additional Perkins Loans and continuing their low five percent interest rate, President Obama hopes that the neediest of students will have access to additional federal financial resources they did not have before.

•      Creating a New College Access and Completion Fund: In this 2010 Budget proposal, President Obama proposes a five-year, $2.5 billion fund to build federal-state-local partnerships aimed at improving college access and completion, particularly from disadvantaged backgrounds. These funds would be used to evaluate programs aimed at increasing college enrollment and graduation and to grow and bring to scale programs that are proven to be successful.

•      Helping Families Save for College: The President's Middle Class Task Force has directed the Treasury Department to investigate ways for 529 savings plans to more effectively and efficiently help families save for college.