Robert O. Weagley, Ph.D., CFP®
“We have to educate our way to a better economy”
- Arne Duncan, United States Secretary of Education
Mr. Duncan’s quote comes from a statement he made in reference to imminent changes with how students complete the information on the Department of Education’s Free Application for Federal Student Aid (FAFSA). The goal is to increase the number of students from low- and middle-income households that attend college by making the FAFSA more “user friendly”. In the process, it is likely that some criteria, that limited families’ eligibility, might be relaxed.
The key elements of the changes:
- Available summer 2009, a shortened and streamlined application. (Enhanced skip-logic is used, if that means anything to you). This new, web-based FAFSA will reduce user navigation for many applicants by about two-thirds.
- Starting in January 2010, 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 Department of Education and the IRS will be working together to examine the possibility of expanding this option to all students in the future. This will make it much easier to complete the FAFSA and should increase applications. The American Council on Education estimates that close to twice as many Pell grants will be awarded if the process is easier.
- The Administration will also introduce legislation seeking statutory authority from Congress to eliminate financial information from the aid calculation formula that is not available from the Internal Revenue Service (IRS). (Note: This is only proposed. It is not yet the law.) This may have implications for those with assets, as twenty-six financial questions will be removed from the FAFSA form that have little impact on aid awards but that make the form difficult to complete. Only questions that rely upon information that applicants must already provide to the IRS would remain. The answer to 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 have an effect on the awards of 3 percent of Pell grant recipients. In the process the questions penalize families who have saved for college, while opening up loopholes for sophisticated applicants to attempt to game the formula.
- The goal of America being the nation with the largest proportion of the population with a college education.
- Expanding Pell grants and college tax credits.
- Expanding the Perkins loan program, to an additional 2,600 schools and an estimated 2.7 million students.
- Asking the Treasury Department to look for ways to make 529 savings plans more efficient and effective.
- Provide incentives to increase college enrollment and graduation rates.
The Department of Education news release is located at: https://webmail.um.umsystem.edu/exchweb/bin/redir.asp?URL=http://www.ed.gov/news/pressreleases/2009/06/06242009.html and more information may be found at: https://webmail.um.umsystem.edu/exchweb/bin/redir.asp?URL=http://www.ed.gov/finaid/info/apply/simplification.html .
- Robert O. Weagley, Ph.D., CFP(r)
Chair, Personal Financial Planning
University of Missouri
Columbia, MO 65211