Participants Said Using Federal Income Tax Data and Revising the FAFSA Could Reduce Applicants’ Burden

		Obtaining IRS Tax Data Could Decrease the Burden on Applicants

Many study group participants said using federal income tax data the  government already collects on annual income tax forms could shorten  the application process, making it easier on students and their families. Specifically, these participants proposed that relevant federal income tax  data be directly transferred to the appropriate answer fields on each  applicant’s online FAFSA. Changes to the Design and Contents of the Form Could Streamline the Application

Many study group participants proposed changes to the design and  contents of the FAFSA that could help streamline the form and make the  application process less daunting for prospective students. Although Education has worked to clarify the online and  paper FAFSA instructions in recent years, some participants said the  length and complexity of the instructions continue to confuse applicants  and should be further reduced and clarified. Participants Said Reducing the Financial Information Required by the Need Analysis Formula Could Ease Applicants’ Burden, but Some Aid Redistribution Is Likely

		Using Less Financial Information to Determine Eligibility Could Reduce Burden on Applicants

Many study group participants supported changing the need analysis  formula to require less financial information from federal student aid  applicants. In particular,  participants discussed the merits of relying solely on a family’s income— as measured by adjusted gross income (AGI) on federal income tax  forms—and the number of tax exemptions to determine aid eligibility. Reducing the Amount of Financial Information Collected Could Result in Redistribution of Federal and State Aid

Many participants said that although it would make the application  process easier on prospective students, reducing the amount of financial  information collected would likely result in some change in the  distribution of federal, state, and institutional aid, and would create new  winners and losers among the pool of aid applicants. Education’s recent proposal to limit the federal formula to financial  information available through federal income tax forms would eliminate  26 financial questions—including those on assets—while retaining up to 20  financial questions that could all be answered with federal income tax  data. Participants Said Technology and Public Outreach Are Central to Implementing Changes, but Several Challenges Must Be Addressed

		Using IRS Tax Data to Populate the Electronic Form Is Feasible, but Presents Challenges

While many study group participants noted the potential benefits of using  IRS data to populate the online FAFSA, some raised questions about the  feasibility and limitations of this approach. Acknowledging these limitations, Education officials said making the  electronic transfer of IRS tax data to the FAFSA feasible for fall college  applicants would likely require the use of income data that would be one  year older than the information Education currently uses to determine  financial aid eligibility. As of July 1, 2010, the Higher Education Opportunity Act  authorizes the Secretary of Education to allow such older data to be used  in calculating applicants’ aid eligibility. For example, applicants may request  professional judgment if they think their financial aid award does not  match their current economic need. In addition, some participants expressed concern about the possible  effects of using prior-prior year data on applicants who are not required to  file income taxes. Currently, New York  residents who submit the online FAFSA are immediately provided a link to  the New York state aid Web site. Beginning in January 2010,  Education plans to offer this type of connection to all states, but the costs  to states—and whether Education will provide financial assistance to  states to facilitate this change—are not yet known. In addition to technological improvements, participants suggested that  efforts to simplify the application should be accompanied by a strategy to  increase public outreach efforts. Our study group participants proposed  various options for mitigating some of the complexity in the application  process, and Education has proceeded with the early phases of its new  plan for simplification, which includes a public outreach component. Agency Comments

We provided a draft of this report to the Department of Education,  Department of Treasury, and the Internal Revenue Service for review and  comment. Appendix I: Expert Panel Agenda

Simplifying the Federal Student Aid Application Process  A Government Accountability Office Expert Panel  Breakfast available in the room Approaches to shortening the form and changing the application process  What are some approaches to shorten the Free Application for Federal Student Aid or  otherwise make it less time-consuming to complete? Break Approaches to changing the statutory need analysis formula  How could the statutory need analysis formula be changed to reduce the amount of  financial information collected, without causing significant redistribution of federal  grants and subsidized loans?
Why GAO Did This Study

Federal student aid is intended to play an integral part in fulfilling the promise of greater academic access and success for less affluent students. However, many experts have expressed concern about the length and complexity of the Free Application for Federal Student Aid (FAFSA) and the statutory need analysis formula used to determine aid eligibility. The Higher Education Opportunity Act required GAO to form a study group to examine options and implications in simplifying the financial aid process. The study group focused on (1) identifying ways to shorten the FAFSA and make it less burdensome to complete, (2) identifying changes to the statutory need analysis formula that would reduce the amount of financial information required by the FAFSA without causing significant redistribution of federal and state student aid, and (3) determining how any changes to the FAFSA and the statutory need analysis formula could be implemented. To address these questions we convened an expert panel on May 7, 2009, and conducted additional interviews with experts. This summary captures the ideas and themes that emerged at the panel and during interviews. It does not necessarily represent the views of GAO or of the organizations whose representatives participated in the study group.

What GAO Found

Study group participants said using federal income tax data that the government already collects and revising the form could shorten the application process, making it easier on students and their families. Many participants proposed that relevant federal income tax data be directly transferred to the appropriate answer fields on each applicant's online FAFSA, an approach that the Department of Education (Education) plans to pilot for some applicants in January 2010. Such a change could decrease the amount and complexity of some of the financial questions on the application. In addition, many participants proposed changes to the design and contents of the form to clarify and streamline the application. Education has recently taken steps to shorten and reorganize the online form and has plans for further improvements. Participants said changing the federal formula to reduce required financial information would ease applicants' burden, but such a shift would likely result in some change in the distribution of aid. Many study group participants supported changing the need analysis formula to rely solely on a family's income and number of tax exemptions to determine aid eligibility. These changes would greatly reduce the number of complicated financial questions on the FAFSA. However, reducing the amount of financial information collected could change the distribution of federal, state, and institutional aid, prompting some concern about this approach. Education's recent legislative proposal to limit the formula to financial information available through tax forms would eliminate 26 financial questions, including those on assets. Participants said technology and public outreach efforts could improve the federal student aid application process, but successful implementation of changes hinges on the ability of federal and state agencies to address several challenges. While it is feasible to electronically transfer tax data directly from the Internal Revenue Service (IRS) to the FAFSA by using income data one year older than what is currently required, participants expressed some concern about the potential implications of such a change. Specifically, using older tax data might result in increased aid eligibility for some applicants whose data may not reflect their current economic needs. In addition, it may be more difficult for applicants who do not file taxes to provide sufficient documentation of their income from two years earlier. Education and the IRS have begun developing a plan to allow some applicants to electronically access their tax data when they apply for aid online. However, because taxpayers can submit their data as late as April 15, these data will not be available in time to accommodate most aid applicants. Many participants also called for linking state aid Web sites to the online federal application to mitigate the potential effects of federal formula changes on state aid. Education plans to offer this option to states in January 2010. In addition, participants said that efforts to simplify the application process should be accompanied by a public outreach strategy aimed at increasing knowledge of the availability of federal student aid. Education plans to undertake a public outreach campaign beginning in fall 2009.