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In Focus: Federal Postsecondary Policy

Apr 12, 2016  |  PERMALINK »

U.S. Department of Education to Address Indebtedness of Student Loan Borrowers with Disabilities

By Lauren Walizer

The Department of Education (ED) announced today that by matching student loan records against data from the Social Security Administration (SSA), it has identified 387,000 federal student loan borrowers who, due to their disability status, qualify for the Totally and Permanently Disabled (TPD) discharge, yet continue to unnecessarily struggle with student loan repayment.  Nearly 179,000 of these individuals are already in default on their loans.

To address this issue, starting next week, ED will begin notifying these borrowers – who have been determined by the SSA to be TPD, meaning their disability status will not improve – of their eligibility for loan forgiveness and provide them with an application for forgiveness that they can complete through the mail or online. CLASP encourages entities that work with individuals with disabilities to raise awareness around this issue.

This push by ED will ease the burden of student loan debt for tens of thousands of disabled borrowers and potentially forgive up to $7.7 billion. Without a TPD discharge, when disabled borrowers default, they may be subject to the Treasury Offset Program capturing their Social Security disability payments to repay their student debt. This is extremely problematic, as many recipients of Social Security disability payments rely entirely on these payments to support themselves.  Nonpayment of student loans can also affect credit scores, which may make it harder for borrowers to secure housing.

Like most other federal loan forgiveness options, the loan amounts discharged through TPD may be subject to taxation. The Obama Administration’s proposed FY 2017 budget calls for excluding such discharges from taxable income; if the budget were enacted, ED could automatically discharge loans for borrowers who have been identified as TPD.  CLASP encourages Congressional action to prevent disabled borrowers from having to pay taxes on any discharged amounts.

Mar 29, 2016  |  PERMALINK »

2017-18 FAFSA Proposes Significant Change for Low-Income Students

By Lauren Walizer and Amy Ellen Duke-Benfield

A notice of the draft of the 2017-2018 Free Application for Federal Student Aid (FAFSA) has been released, and it includes a significant change for low-income students that deserves attention and recognition: the addition of an applicant’s receipt of Medicaid as a qualification for the Simplified Needs Test (SNT). This will simplify and shorten the FAFSA application process for thousands of low-income individuals and better ensure they receive the full financial aid for which they are eligible. CLASP firmly supports this change and applauds ED for this thoughtful action. We will be formally submitting comments stating our support for this plan, which can be found in the Federal Register online at Docket No: ED-2016-ICCD-0036, and we strongly encourage others to do the same, for the many reasons we describe below. CLASP will release our comments by early May and will encourage others to consider our suggestions as they develop their own comments.

The SNT is an alternative way for the FAFSA to calculate a student or family’s Expected Family Contribution (EFC). An independent student completing the FAFSA would be eligible for the SNT if his (and spouse’s, if any) adjusted gross income (AGI) is below $50,000, and if one of the following are true: he files a simplified tax return or isn’t required to file one; he is a dislocated worker; or he received benefits from one of five[1] means-tested programs in the prior two years. (The rules are the same for a dependent student, except that the tax return and dislocated worker pieces are applied to the applicants’ parents, and the means-tested benefits standard applies to anyone in the household.) The change announced today increases the number of eligible means-tested programs from five to six.

Allowing recipients of Medicaid—who, we would argue, have already proven their low-incomes through receipt of this means-tested program—to use the SNT allows them to have a significantly expedited application process. The SNT requires only six elements, none of which should require lengthy calculations or paperwork, such as AGI, federal taxes paid, and the number of family members in the household.

The length and difficulty of completing the application is a common barrier for students. Three out of 10 undergraduates—but nearly four out of 10 community college students—do not complete the FAFSA. Among students who cited that the “forms were too much work” as a reason they did not apply, half had incomes under $50,000, and close to 40 percent would have qualified for a Pell Grant. While community college students may be among the least likely to complete the form, they may also benefit the most from this change. Recent research on the mental health of college students found that nearly one-quarter of community college students were the recipients of Medicaid (or other government-sponsored insurance). Having a dramatically shorter FAFSA—coupled with the previously announced change to allow for prior-prior year income on the FAFSA—would greatly improve the chances that these students will complete the form and give them access to financial aid they would have otherwise foregone.

This change can improve the chances of students staying in school and completing in other ways as well. Research that controlled for student background characteristics and college experience found that FAFSA filers had a 72 percent greater chance of persisting than non-filers. For Pell-eligible students, this effect was even greater: filers had a 122 percent greater chance of staying in school. For students who would have completed the FAFSA regardless of the announced change, it could provide them with a small amount of additional financial aid, reducing their unmet financial need. Too often, students lack the financial resources to continue their program of study, and have no option but to drop out.

We believe this action will further codify President Obama’s remarkable legacies around education and health care access. The expansion of Medicaid has allowed millions to receive more affordable health care, and has particularly benefited groups such as uninsured adults, parents with dependent children, working adults, and veterans. Individuals with characteristics such as these are the core population of today’s non-traditional postsecondary students, who are more likely to attend college while caring for families or working, or are low-income. Connecting them with available resources is imperative for both their health, and for opportunities to further their education and training.

[1] The five programs are: Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), Free and Reduced Price School Lunch, Special Supplemental Nutrition Programs for Women, Infants and Children (WIC) and Temporary Assistance for Needy Families (TANF).

Sep 14, 2015  |  PERMALINK »

Department of Education Announces Significant Change Simplifying Application for Federal Financial Aid

By Lauren Walizer

Today, President Obama announced a significant policy shift that will help low-income students access college financial aid by making the Free Application for Federal Student Aid (FAFSA) simpler to complete. This key administrative change, which CLASP supported in its recent recommendations for higher education reform, would allow applicants to complete the FAFSA using income tax data from two years prior to the current year.

This change is a major win for students, significantly simplifying the aid application process. Forty percent of students who said they didn’t complete the FAFSA because it was “too much work” would have qualified for a Pell Grant. At community colleges alone, 39 percent of students fail to apply for federal financial aid. Allowing applicants to use income from the “prior-prior year” will make it easier for low-income students to apply for aid using the IRS Data Retrieval Tool, which can automatically import their tax information. This will save students time and paperwork and allow them to apply for financial aid earlier. By accessing more relevant information further in advance, students will be able to make more informed college decisions, as well as apply for state and institutional grant aid that is given out on a first-come, first-served basis.

Under the current rules, applicants must wait to complete the FAFSA until January 1 of the year they plan attend a higher education institution. Additionally, they must verify their household income using their most recent tax data. For instance, a student completing the FAFSA for the 2015-2016 academic year (which begins July 1, 2015) would not be able to access the form before January 1, 2015 and would have to use their 2014 tax data.

Starting with the 2017-2018 FAFSA form, the announced change will allow students to access and submit the form three months earlier—beginning October 1 instead of January 1—and use the tax data from two years prior (in this case, 2015 income data rather than 2016).

According to a report on the potential impact of a prior-prior year policy, independent students without dependents are most likely to see a change in their Pell award of $1,000 or more when using tax information from two years prior. Additionally, while this policy will help many students obtain the financial aid they need, it is important to protect students who have experienced a significant drop in income between the prior-prior year and the time of enrollment. When evaluating either such applicant type, CLASP strongly encourages institutions to use their professional judgement authority.

The U.S. Department of Education should further encourage this practice through their materials and guidance—reminding institutions about their ability to exercise professional judgment and advising students about their right to request a professional judgment appeal. CLASP has continuously highlighted the need for policies to support independent adult students, who make up an increasing share of college students and who frequently juggle school with work and family obligations.

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