One Easy Fix That Could Make College Financial Aid Simpler and Better

Everybody knows you don't tell the salesman you'll take the car before you negotiate the price. Now the nation's college financial aid officers are saying it's just as dumb for high school seniors to have to pick the colleges they want to apply to before they know how much aid they'll get.

In a new paper, the National Association of Student Financial Aid Administrators says students and families would be much better off if the federal government allowed them to fill out the Free Application for Federal Student Aid (FAFSA) the September their child starts senior year in high school instead of having to wait until January.

Applying for aid earlier would dramatically reduce the anxiety families face during college application season, because they would know how much aid they qualify for—and therefore have a better idea of what schools they could afford—earlier in the application process, NASFAA said. Current students would have more time to plan for the next school year too.

Moving up the deadline would also make filling out the FAFSA form much easier, since most families have filed their taxes by September and thus could use the FAFSA's IRS Data Retrieval Tool to automatically fill in many fields with financial information from their tax returns. As it stands now, when families start the FAFSA in January they often haven't even begun preparing their taxes for the prior year, which is the year on which the financial aid forms are based.

The change "stands to revolutionize the FAFSA application process and along with it the effectiveness of financial aid and admissions processes for institutions," according to the administrators' association.

The report is significant in that it represents the views of not only financial aid professionals, but also admissions officers, state grant agencies, and college access programs. Even before this paper, the proposal had widespread support. Forty-five organizations, ranging from student associations to major university lobbying groups, signed a memo in December lobbying for it.

So what's stopping this great idea?

The two usual suspects: politics and money.

Only Congress can move the date that the FAFSA is released from January to September. And Congress hasn't embraced the idea because lawmakers are afraid it will a lot of cost money, in part because making things easier for students will mean that more students apply for aid.

In a paper earlier this year, Robert Kelchen, an assistant professor of higher education at Seton Hall University, estimated costs ranging from $6 billion to $13 billion over 10 years. Kelchen said his estimates are based on financial aid data from nine colleges.

Currently lawmakers are working to reauthorize the Higher Education Act, and proposals to simplify the FAFSA have been a major part of that discussion.

But NASFAA doesn't think there's a need to wait. The Department of Education has the authority to change the FAFSA process to let families use older tax information. That wouldn't change the timeline to apply—applications would still become available in January—but it would make filling them out simpler, since families could use completed tax information. Education Department officials have indicated they support the idea generally but need more information about the cost.

Some experts have expressed concern about basing a student's financial aid for each fall on their family income of two years prior. For example, a rising high school senior would fill out the FAFSA with information about his family's income from 2014 in order to qualify for financial aid when he starts college in the fall of 2016. (Washington, D.C., wonks have dubbed the idea "prior-prior year" or PPY).

A layoff or an economic downturn can cause significant and sudden changes in a family's need for aid that would be missed if the aid application only looks at two-year-old financial circumstances, says Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities.

"What would have happened if we had PPY in 2008?" Nassirian asks.

"I'm not against it," Nassirian adds, "I'm just pointing out that it's not a no-brainer. It has a predictable down side that we should at least talk about."

NASFAA officials, however, say aid offices can handle appeals based on sudden changes, known as "professional judgment reviews," especially if the timeline is moved up to give offices more time to process applications.

Megan McClean, director of policy and federal relations at NASFAA, notes that in a previous study, the organization looked at financial information of Pell Grant recipients between 2007 and 2012, and even with the recession, it found minimal fluctuations in income over two-year periods.

Even then, Nassirian describes it as an "operational failure" to use old data instead of current income information. The amount a family should be able to contribute to college costs is determined by income, assets, household size and number of children in college. Most of that information is already collected every year by the federal government, and can be easily accessed and transferred with today's technology.

A real solution, Nassirian says, would be eliminating the FAFSA altogether. Instead, he says, people could use their tax return as their financial aid application.

Read next: 7 Legal Ways to Squeeze More College Aid From the FAFSA