Mark Kantrowitz, author of several higher ed web sites and renowned expert on financial aid, is calling for a drastic simplification of the formulas that the federal government uses to determine aid eligibility. In a New York Times piece, Kantrowitz said the current formulation is far too complex, and even along with such complexities, fails to account for the particular nuances of individual student plus family situations. According to Kantrowitz, financial aid eligibility should be based, essentially upon income.
Currently, the info — and the calculations behind it — that a school uses to determine your eligibility for financial aid is dependent largely on you, your parents and what type of institution the school is. Most schools rely, completely or in certain part, on a federal model referred to as “expected family contribution” (EFC). The particular EFC is the criteria used by educational institutions, whose students rely on federal financial aid to help pay for their educations, to determine aid eligibility. Such schools include practically all public institutions and several (if not most) private colleges. Regardless of the school, Yuma Community College or Yale, if you are receiving financial aid under a federal government program, the prize will be based on your EFC.
The information used to calculate EFC comes from the Free Application for Federal government Student Aid (FAFSA; yes, we’re wading into the realm of FGAAS: federal government acronym alphabet soup) that you will fill out every year you go to college and hope to get federal aid to do so.
Utilizing the information from your FAFSA, your school’s financial aid officials (and their helpful computers) will apply a formulation known as the federal methodology (no acronym) to your individual situation. They look at your income and assets, as well as the ones from your parents to arrive at your EFC. As a general rule, the closer your EFC is to the estimated cost of going to the school you’ve chosen, the much less eligible you are for federal financial aid — because the federal government and your college expect you to contribute an amount corresponding to your EFC to your education (thus, “expected family contribution”).
In his opinion piece, Kantrowitz records that financial aid enables students in order to pursue a college education in spite of their limited financial resources. It can also serve other public policy goals like keeping the United States strong in science, math, engineering and other fields associated with strategic and economic importance. It isn’t really just an investment in the future of the individual college student, but in the future of the nation.
We should simplify the need analysis formulations and stop including assets when determining eligibility.
The formulas intended for financial aid measure ability to pay simply by assessing a portion of the family’s discretionary income and assets. Discretionary revenue is the amount of taxable and untaxable income that remains after subtracting mandatory expenses like basic living costs. Unfortunately, student aid types and formulas are so complicated which they practically serve as obstacles to achievement, and for some of the truly daunted, also barriers to access.
We should simplify these formulas. Most other means-tested government benefit programs like the Supplemental Nutrition Assistance Program (S. And. A. P. ) and Short-term Assistance for Needy Families (T. A. N. F. ) base eligibility on a comparison of revenue with a percentage of the poverty line. Even the income-based repayment plan actions ability to repay student loan debt right after graduation by measuring current discretionary income, which is defined as the amount by which income exceeds 150 percent from the poverty line. Why not use a comparable formula for determining tuition due?
Switching to an unique income-based formula would allow financial aid application forms to fit on the back of a postcard. It might even allow families to apply for financial aid before they apply to colleges by checking a box upon federal income tax returns two years before enrollment, allowing college affordability in order to influence college choice.
When assets are considered in these formulations, families can get discouraged about conserving and making plans for the future. Assets presently do not contribute much information when evaluating ability to pay. Most wealthy families would still be denied the particular federal Pell grant based on revenue alone if their assets were ignored. The family home, retirement plans plus small family businesses are not reported as assets on many financial aid application forms. We could go further in this direction. Assets should be omitted entirely.