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

On September 14, 2015, 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.