Many smart students forgo college in the mistaken belief that they cannot afford it. The financial aid system, which is intended to increase opportunities for low-income students, is largely to blame.
Students must fight through thickets of paperwork and endure long delays to obtain definitive information about the aid for which they qualify. Many give up before they learn that college is affordable.
But there is hope on the horizon. In a rare case of cross-aisle cooperation, congressional Democrats and Republicans are working on legislation that could simplify and speed the aid process. One bill, sponsored in the Senate by Lamar Alexander, Republican of Tennessee, and Michael Bennet, Democrat of Colorado, would cut the lengthy federal aid application, now longer than the typical 1040 Internal Revenue Service form, to just two questions.
We could go even further and eliminate the aid application altogether. That may sound radical, but it’s not.
The widely despised form known as the Fafsa (which stands for Free Application for Federal Student Aid) is unnecessary. The Fafsa is required of all students seeking federal aid, but the information needed to calculate eligibility for that aid is already collected by the I.R.S. In a simplified aid system, tax filers could just check a box on the 1040 to learn immediately about eligibility for federal grants, loans and tax credits.
The distinction between having no Fafsa or the two-question Fafsa proposed in the Alexander-Bennet bill may appear minor. How much effort is there, after all, in answering two questions? But a large body of evidence from economics and psychology shows that even minor bureaucratic hurdles can keep people from making smart investments in their futures.
Nudges matter. One influential study examined a financial firm where new employees opted in to the retirement-savings plan by completing a short form. The company adjusted the process, instead allowing new employees to opt out of the savings plan by completing the form. This tiny change increased the share of employees saving for retirement by 50 percentage points.
When adult professionals working in the financial sector are put off by minor paperwork, it’s no surprise if adolescents are similarly affected. Saving for retirement and preparing for college are similar: They both impose costs in the present in exchange for benefits in the future. Research shows that in these situations people deviate systematically from rational behavior, often to their own detriment.
To quantify just how much the aid bureaucracy discourages college attendance, a team of economists ran a randomized trial in which families applied for aid in a radically simplified process. The results were striking: The streamlined process increased the share of low-income young people who attended college for two years by eight percentage points (to 36 percent from 28 percent).
History suggests that if we try to shorten the Fafsa, rather than get rid of it, complexity will creep back in. In 2008, Congress directed the Department of Education to allow homeless applicants to complete a shortened Fafsa. The department responded by adding to the Fafsa three questions that ask whether an applicant qualifies as homeless. That’s right: When directed to simplify the application, the Department of Education lengthened it. Congress made a big push to simplify the Fafsa in 2009, removing two dozen questions, but with the same legislation, it added a dozen questions.
The Fafsa seems to be where everyone’s pet idea about targeting aid goes to roost, producing a stubbornly long form. Eliminating the Fafsa and relying on tax data to calculate aid eligibility is the clearest route to permanent simplification.
We have a precedent for using tax data to calculate college aid. Eligibility for college tax credits, including the federal American Opportunity Tax Credit, is calculated solely from tax data. These credits go to families with incomes as high as $180,000. Why do these high-income families qualify for aid by simply filing their taxes, while low-income families must fill out the Fafsa to qualify for a Pell Grant? We have created an aid system that is most complicated for the low-income families who are its target.
Some argue that the complexity of the Fafsa is a necessary evil, without which we could not precisely measure who most needs aid. In this view, the many questions on the Fafsa allow us to target aid to the needy. To address this concern, along with Judith Scott-Clayton of Columbia and Mark Wiederspan, then of the University of Michigan, I examined detailed data from thousands of aid applications and aid packages, testing how aid would change if questions were eliminated from the Fafsa.
We found that dozens of questions on the Fafsa contribute virtually nothing to the determination of grant aid. Why do so many questions matter so little? If a family has very low income, say $15,000, then the student is eligible for the maximum Pell Grant. We don’t need to ask whether the family receives food stamps. Similarly, if a family has a high income, say $100,000, then the student is not eligible for any Pell Grant, and we don’t need to ask about investments.
The Fafsa burdens families and prevents students from attending college, while doing little to target federal aid. Getting rid of the Fafsa could narrow the large gaps in college attendance that persist between the rich and poor in the United States.
Editor’s Note: This article originally appeared in The New York Times