Last month the Obama administration unveiled a revamped Free Application for Federal Financial Student Aid (FAFSA). The new FAFSA is available in October rather than January, so high school seniors won’t have to wait until their spring semester to apply for aid. This means that students can factor their federal grant and loan eligibility into their college application process, instead of getting information about aid after they apply or even after they are admitted. The FAFSA will also be easier to fill out. In the past, students had to wait until their parents filed taxes in January (or later) and then fill out the FAFSA, but the updated form allows families to electronically transfer their tax data from the previous year’s IRS returns, which means that many income-related questions can be filled in automatically. This will drastically reduce the amount of time it takes to fill out the FAFSA.
These changes can benefit Californians in multiple ways. A streamlined FAFSA that families can fill out earlier may induce more students to complete the application, which is likely to lead to an increase in Pell Grants. According to nationwide estimates, 6 to 10 percent of college students from families with incomes under $48,000 fail to fill out the FAFSA; this suggests that many students in California and elsewhere are currently missing out on Pell Grants.
For Californians, the FAFSA is not just a federal aid application; it is also a prerequisite for participating in many state and institutional aid programs for students from low-income families. Cal Grants, the largest source of state aid, can cover up to the full tuition at a UC or CSU for students who qualify. UC’s Blue and Gold Opportunity Program combines federal, state, and local aid to ensure that students from families making less than $80,000 per year do not pay any tuition. But students who do not fill out the FAFSA are not eligible for any of these programs. National data show that about 20 percent of families who make from $48,000 to $75,000 do not fill out the form and therefore are potentially paying more than necessary for college.
Increased FAFSA completion rates may also benefit students from higher-income families. As PPIC has noted, the increases in tuition between 2007 and 2011 primarily raised the cost of attending a UC or CSU for many students from middle- and upper-income families. Filling out the FAFSA can help these students qualify for California’s Middle Class Scholarship, which covers a portion of the tuition and fees at UC and CSU for students with family incomes of up to $150,000 per year. In addition, FAFSA completion can help students qualify for federal loans and decrease their reliance on private loans, which can be more expensive and potentially riskier than federal loans.
Lastly, students who get financial aid—and who find out about it earlier in the application process—are better able to assess their college options. For instance, a student who knows that financial aid is available might apply to a four-year university instead of a two-year college. While the four-year school may be more expensive, research suggests that students who begin at a four-year institution are more likely to get a bachelor’s degree than if they begin at a community college with the intention to transfer to a four-year school. In other words, making the FAFSA process easier may not only help students afford college and take on less debt; it may also lead to higher baccalaureate degree completion rates.