The Cost of Complexity in Federal Student Aid Susan Dynarski & Judith Scott-Clayton Harvard University
Consider the FAFSA
More FAFSA
Yet More FAFSA
Complexity of financial aid rivals that of taxes Table 1. Complexity of the FAFSA Versus IRS 1040 1040 2005
1040A 2005
1040EZ 2005
FAFSA 2006-2007
2
2
1
5
Total number of questions
118
83
37
127
Non-financial items
27
27
21
65
Financial items
91
56
16
62
71
43
8
72
Length of signing statement
49 words
64 words
59 words
232 words
Official estimate of time to prepare**
16 hours
13 hours
8 hours
1 hour
Measure Number of pages (excluding instructions)
Number of items required for computation of tax/refund or aid amt.*
Costs of Complexity
For low-income families, aid forms more complex than typical income tax return.
85% of families with income <$50K use 1040A
FAFSA daunting for anyone, but especially for
First generation college students Non-English speakers
Cost of complexity: information about aid arrives late Aid information is back-loaded Fill out FAFSA Jan 1 Hear from schools in mid-spring of senior year Too late to affect decision to prepare for and attend college
Figure 1. The Student Aid Application Process Fall - Spring of Senior Year
January-March of Senior Year
Student Applies to Colleges Student assembles and submits college applications, including test scores, transcripts, recommendations and essays.
Student Submits FAFSA to Government Student and family provide detailed demographic and financial data, and list up to six schools to receive FAFSA data.
4-6 Weeks After Submitting FAFSA (2-3 weeks for on-line submissions) Student Receives SAR The SAR provides the student's EFC and states whether he is eligible for a Pell Grant, but provides no dollar amount.
Government Processes FAFSA Processing service calculates the family's expected contribution (EFC) and sends a Student Aid Report (SAR) to the student and schools.
Colleges Receive Applications and Admit Students
Schools Receive SAR and Assemble Aid Package Financial aid offices use the EFC, the school's cost of attendance, and other information to design a package of federal, state, and institutional aid, which is then sent to accepted students.
March-April of Senior Year Student Learns Aid Eligibility Student learns about amount of federal aid (Pell Grant, Stafford Loans, work-study) and schoolspecific aid (scholarships and loans).
Benefit of complexity: Improves targeting. How much?
Examine empirically how each question asked on FAFSA affects distribution of aid National Postsecondary Student Aid Survey 200304
Nationally representative sample of college students Extract data on
Student aid All information in FAFSA Expected family contribution
Measure marginal contribution of each question to distribution of aid
What happens to the Pell if we throw out 80% of the FAFSA?
Use income and family size to distribute Pell
Throw out 90% of FAFSA: determine aid using six questions.
Key advantage of the last approach
It can be run through the tax code
No separate application required
All information required (AGI & household structure) is already gathered by IRS
Check off a box on 1040 to indicate family member will be going to college Grant delivered to colleges at time of enrollment, as is the case with aid now
Aid can be forecast and communicated to families early, based on AGI alone
Aid eligibility on a postcard: combine Pell & tax credits
Combine tax credits and Pell
Simplifying the FAFSA is not enough
To be effective, aid needs to be simple and certain Information about simple and certain aid can be communicated to families early Early information maximizes the impact of aid
Academic preparation for college starts in elementary and secondary school Knowing college is affordable makes it more likely family and student will prepare Examples:
state merit aid programs (Georgia HOPE, Arkansas Challenge) Social Security student benefit program
Conclusion
Federal student aid may be an effective poverty relief program, but is not an efficient college incentive program
Applying economic theory to student aid design highlights potential costs of complexity
Empirical analysis suggests little benefit to this complexity
By reducing complexity we can deliver information about aid early, when it can make a difference
The Cost of Complexity in Federal Student Aid, College Board ...
The Cost of Complexity in Federal Student Aid, College Board Colloquium.pdf. The Cost of Complexity in Federal Student Aid, College Board Colloquium.pdf.
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There was a problem previewing this document. Retrying... Download. Connect more apps... Try one of the apps below to open or edit this item. The Cost of Complexity in Federal Student Aid, May 2006, WP 12227.pdf. The Cost of Complexity in Federal Stu
We thank Sandy Baum, Sandy. Jencks, Jeff ... Scott-Clayton is grateful for funding from the National Science Foundation and the Harvard ... We describe the.
evidence suggests about the optimal design of financial aid programs. Second, we broaden our. quantitative analysis to include the important topic of student ...
There was a problem previewing this document. Retrying... Download. Connect more apps... Try one of the apps below to open or edit this item. (May 17, 1991) ...
Page 1 of 44. DOCUMENT RESUME. ED 332 631 HE 024 594. TITLE Abuses in Federal Student Aid Programs. Report Made. by the Permanent Subcommittee on Investigations of. the Committee on Governmental Affairs United States. Senate. INSTITUTION Congress of
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