CLASP: Lawmakers Should Raise Threshold for “Auto-Zero” EFC

By Allie Bidwell

As lawmakers continue to talk about ways to simplify the process of applying for federal financial aid, they should also focus specifically on the plight of low-income students, and consider raising the income threshold for calculating the automatic zero Expected Family Contribution (EFC), according to a policy brief from the Center for Law and Social Policy (CLASP).

In the policy brief, released last week, Lauren Walizer, a senior policy analyst for CLASP’s Center for Postsecondary and Economic Success, wrote that if Congress had not reduced the threshold in 2012 to $23,000, the threshold today would be nearly $35,000 if it continued to rise with inflation. Student from families making between $25,000 and $35,000 annually “have significant financial need and are disproportionately students of color and frequently financially independent from their parents,” she wrote.

Today, “financial need goes further up the income stream than it once did, and the conception of ‘low-income’” should include those students, she said in the brief. Walizer recommended setting the rate at a level similar to other federal programs, at a certain percentage above the poverty line. For income-driven repayment plans, for example, she wrote that the applications determine a discretionary income, excluding income up to 150 percent of the poverty line, which would be $31,170 for a family of three.

Even after accounting for financial aid given to students in two low-income categories ($0-$25,000; and $25,001-$35,000) both groups of students still end up with significant amounts of unmet need, Walizer wrote.

“Because these students have low incomes, they generally lack financial resources for all their living and school-related expenses,” she wrote. “The student aid system compounds that by providing inadequate grant aid. Even students attending community colleges, where costs are typically lower, average several thousand dollars in unmet need.”

But in particular, students of color appear to have been most impacted by lowering the threshold for an auto-zero EFC, she wrote. They are more likely to have incomes below the previous threshold of $32,000 and the current threshold of $25,000. Overall, about 43 percent of students have an adjusted gross income below $25,000. But that percentage is significantly higher for black (59 percent), Latino (50 percent), and students of Native heritage (53 percent).

“Policy changes providing targeted and tangible benefits to low-income independent students with dependents would most significantly assist students who are Black, Latinx, and of Native heritage,” Walizer wrote. “Given continuing demographic changes among those enrolled in postsecondary education, students of color will soon outnumber white students. Broadly, reforms to support these students must focus both on improving college access—such as through the autozero EFC change—and on supporting student persistence and completion.”

 

Source URL: https://www.nasfaa.org/news-item/14854/CLASP_Lawmakers_Should_Raise_Threshold_for_Auto-Zero_EFC