Report: Financial Aid Process Is Too Confusing

<p>The causes (3) are really simple: 1) Congress writes complex laws (on purpose); 2) families are not-standard (death of spouse, divorce, remarry, divorce, 1 sib, 10 sibs…), and 3) income is non-standard. Some earn straight wage/salary, others are partners in a business, others ‘own’ a business.</p>

<p>And even if we could vote only for Congressional representation that would guarantee to simplify #1, #2 & #3 won’t go away.</p>

<p>Rockvillemom: some colleges do in fact show a table of aid packages at different income levels. The problem, I am sure, is that they don’t are afraid of scaring potential applicants away, however, particularly if that applicant might be hooked. For example a $150k income may earn zero aid with zero siblings, but a whole bunch of free $$ with 6+ college aid kids in the house. Conversely, a table might show a lot of grant money at a $60k income level, but the applicant forgets to include the non-custodial spouse. In the former case, an applicant from a large family might be scared from applying due to cost; in the latter, the acceptee is mad at the college bcos they can’t afford it - and think it is a game of bait and switch.</p>

<p>I have often wondered why the gov can’t just use your tax return to then decide if you qualify for any fed. aid, and what the EFC would be. The tax return could just have a simple area that you would check off if you had a student going to college and needing financial aid. It sure would save a step, and paper too. Those not filing tax returns would need to fill out the Fafsa or similar thing, just like they do now anyway.
That being said, with just a bit of effort and research, learning about the FA process, and all that goes with it, good and bad, hasn’t been that taxing or difficult. I hate to sound terrible, but if you can’t grasp the basics, or take it upon yourself to learn about the topic, maybe you aren’t of the caliber intellectually to go to college…in my opinion things most people are required to learn and do are a lot more complex and involved than fin. aid. Just because it involves numbers, people suddenly get overwhelmed - but if you slow down and think, it’s understandable to most. Sure, predicting how much you are going to receive in aid is tough to do, but that’s a transparency issue. The process itself is not - so just learn, fill out the forms, see what colleges offer, and then figure out what works for your financial situation. It’s not rocket science!</p>

<p>kelsmom, I just wish that public schools would list their aid for instate kids separate from the OOS awards. The data is all there on the Common Data Set, but as rockvillemom pointed out, it’s just not always available to both groups. It would be helpful if the average aid was broken down into categories like federal grants, state grants, etc…one would know instantly which portions to exclude!</p>

<p>Rockvillemom - I too am feeling the same way. Our D too applied to some schools that clearly state - that they only give need based aid. I know, even before we go any further, that we will not get any “financial aid”, 2 incomes and we have been good stewards and saved for our child’s education. I truly feel that more schools should focus on merit scholarships, where all kids are equal. It does not seems far to me that we would be “penalized” in a sense. Our D is looking at a wonderful private school @$59,000 a year, but how and why would anyone want to spend $236,000 on an undergraduate education? She got an awesome Merit scholarship from Purdue, which would bring out cost down to $23,000 a year-out of state. I am sure she will be a great candidate for the $59,000 a year school, but I am sick to my stomach about the need based only mentality. It is just not fair. So, do we tell our kids NOT to apply to these schools?? I want her to “reach for the moon”, but in the end, we have to be realistic.</p>

<p>Sue,</p>

<p>I have issues with merit aid! Freshman year grades tend to be the lowest of all, and for many merit scholarships you need to keep a 3.0 to keep the merit aid. Let’s say a kid has a 15k per year merit scholarship and pulls a 2.98 GPA in a tough program like engineering their freshman year. For most schools that merit is terminated. The student might pull the GPA up nicely but tough cookies. A 2.something GPA is not bad at all for a freshman engineer or science major, but that kid will lose the scholarship. Heartbreak! Now the student feels awful about him/herself and the parents are on the hook for 15k plus more per year. Yes, at least in this case the student has some control over the outcome, but still I think merit has its pitfalls, too.</p>

<p>teachandmom - I liked your first thought - just submit your 1040 and be done with it. But then your post became very condescending. For someone such as myself, with a background in the financial industry and a very simple 2 W-2 household - the CSS Profile and FAFSA are not difficult. I do our taxes myself every year and have no problem with these forms. But, I can UNDERSTAND and SYMPATHIZE with those who are self-employed, divorced or have other issues that make these forms more complex.</p>

<p>My point in this discussion, however, was not about the complexity of the forms. My gripe is that you can submit the exact same info to 5 different schools and get 5 very different results. My gripe is that the amount of FA one will receive is close to impossible to predict. My gripe is colleges that quote generous sounding FA statistics but the packages, in reality, are laden with loans. My gripe is that the FA packages for subsequent years are often much worse - with less grant money and greater amounts of loans. My GRIPE is that the FA process makes it very DIFFICULT for families to plan their finances for the 4 years each child is in college because you DON’T KNOW HOW MUCH EACH FREAKIN YEAR IS GOING TO COST!!! No, it’s not rocket science - it is aggravation and stress!</p>

<p>nt ZZZZZZZZZZZZZZZZZZZZZZZZ</p>

<p>More low-income students would make it to college if changes were made to streamline the complicated financial aid process, according to a groundbreaking study released today by researchers at the Harvard Graduate School of Education, Stanford University School of Education, the University of Toronto, and the National Bureau of Economic Research.</p>

<p>The new study, conducted by Stanford University Associate Professor Eric Bettinger, Harvard Graduate School of Education Professor Bridget Terry Long, and University of Toronto Associate Professor Philip Oreopoulos, tracked nearly 17,000 low-income individuals and determined that cumbersome financial aid forms and lack of information about higher education costs and financial aid prevented access to higher education.</p>

<p>At H&R Block offices during the 2008 tax season, the researchers invited individuals aged 17 to 30, who earned less than $45,000 annually in Ohio and North Carolina, to participate and randomly assigned them to one of three groups. For one group of participants, employees helped fill out the 102-question Free Application for Federal Student Aid (FAFSA) that serves as the critical application and gatekeeper for federal aid, as well as most state and institutional aid.</p>

<p>In order to streamline the process, the researchers prepopulated the application with already-collected tax information and then helped participants answer remaining questions. This significantly reduced the FAFSA form completion time from 13 hours to less than 10 minutes. Participants were also given personalized information about their financial aid options. Following the application process, the researchers tracked the progress of participants who were given aid information alongside those participants who did not receive help to determine whether streamlining the application process and providing information increased college enrollment.</p>

<p>[New</a> study shows simplifying financial aid process improves college access for low-income students | Stanford University School of Education](<a href=“Press Releases | Stanford Graduate School of Education”>New study shows simplifying financial aid process improves college access for low-income students | Stanford Graduate School of Education)</p>

<p><a href=“http://gseacademic.harvard.edu/~longbr/Bettinger_Long_Oreopoulos_Sanbonmatsu_-_FAFSA_experiment_9-09.pdf[/url]”>http://gseacademic.harvard.edu/~longbr/Bettinger_Long_Oreopoulos_Sanbonmatsu_-_FAFSA_experiment_9-09.pdf&lt;/a&gt;&lt;/p&gt;

<p>Kelsom wrote:

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<p>Kelsmom without the unforgivable loans we are currently saddling our 18-22 year olds with, there would be a price correction. Right now, the colleges recieve a tremendous amount of financial aid from the students, who have really very little understanding of how they are selling their future out. The price of a college education is not what the true market will bear.</p>

<p>The costs would come down. Less “free money” would be necessary.</p>

<p>College costs are not “real,” they are “bubble” prices. It’s a false argument based on an incredibly unethical lending practice.</p>

<p>Uhhh I so agree the aid process is such a PITA. So many people at my school were lost and panicking for what to do. I almost freaked out when I realized some schools needed the W2 forms and 1040 stuff. </p>

<p>My “aid” package from Babson was 7700. It was all loans, and a bit of work study. Yeah right no way I’m going there unless I can get one of their scholarships.</p>

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<p>I’d add a fourth reason: As noted above, the banking industry loves the current system, and their lobby is one of the most powerful in Washington. As long as Congressmen’s and Senators’ re-elections depend on pleasing the banks, there won’t be any significant changes. If we reformed the election finance laws, that would open the door to bursting the bubble that poetgrl mentioned. Trouble is, the people who’d have to reform the laws are the very same people who are benefitting from the current laws. Don’t hold your breath.</p>

<p>We also need to eliminate the H&R Block (and other tax preparers’) Lobby. </p>

<p>This sentence from that study jumped out at me: “At H&R Block offices during the 2008 tax season, the researchers invited individuals aged 17 to 30, who earned less than $45,000 annually…to participate”.</p>

<p>Dammit, people in this group likely file the 1040A or 1040EZ, or their tax situations are otherwise pretty simple, and people of modest means shouldn’t have to PAY their hard-earned money to file their taxes. They should be able to get FREE tax-filing assistance, or better yet – TEACH enough basic math skills and consumer education in the schools so that high school graduates are equipped to file a basic tax return themselves (and grasp concepts like “marginal tax rate”) - it’s not rocket science. Or even better <em>yet</em>, electronic filing should have been, and could have been made FREE and through the IRS website (eliminating the H&R Block and TurboTax middlemen) DECADES ago. But you can bet your sweet bippy that the H&R Block Lobby has (or would) fought vigorously against such an idea. Make it kind of like FAFSA, which is free and online: have the IRS site walk you question-by-question(with little “help?” boxes where necessary) through your relevant financial details, using skip-logic where possible. The computer program does the math, shows you the form as it’s being filled out by the computer, and computes how much your total tax liability is and how much you owe or will be refunded. The IRS already has a good withholding calculator online which pretty much functions like this. The online FAFSA process actually works quite well, and they have good phone support.</p>

<p>It chaps my hide that, at least until this year (or so) with the IRS’s “Free Fill In” option (or whatever it’s called), if you made more than $58K per year, there was no way you could e-file for free - you had to go through either the H&RBlock middleman or the TurboTax middleman in order to do so. I’ve stubbornly refused to pay good money in order to file my taxes, so I’ve been doing it on paper via snail-mail. It’s in the IRS’s best interest to have people e-file, because returns are much easier and cheaper to process that way – they should have made it possible for people to do so for free a long time ago. Instead, they’ve been keeping the tax-preparing industry afloat. Only people with complex investments and tax shelters (or complex businesses) should have to shell out $$ to have their taxes done.</p>

<p>OK, rant over. WHEW!!</p>

<p>Here are some realities:</p>

<p>People lie on their FAFSA’s. During verification, it is not uncommon to see parent income grossly understated. I am pretty sure 0 rather than $50,000 is not an oversight on the part of the person completing the FAFSA.</p>

<p>The IRS will not allow direct access to tax information in any other format than that ALREADY available to families in the FAFSA application process.</p>

<p>You will not be able to get a one-size-fits-all aid package from a Profile school. Awarding institutional funds at a Profile school is often an art, which includes enrollment management. These schools are private, and they can do what they feel is best for their school, using their own money as they see fit. Students must understand this, and families must deal with it or choose to apply elsewhere.</p>

<p>Public colleges must first benefit taxpayers in that state. Only UVA and UNC-Chapel Hill state that they will meet need for OOS students. UM is clear on this: </p>

<p>Special Note to Out-of-State Students</p>

<p>While the Office of Financial Aid does not have sufficient funds to meet the full demonstrated financial need of nonresident students directly, students who are eligible for scholarships from U-M schools or colleges or other private sources may be able to cover their costs through these combined resources. </p>

<p>This statement is on the website, in the financial aid section, under a tab for Nonresident Students.</p>

<p>I don’t disagree that the aid system needs fixing. However, my suspicion is that many want it to match what they want to pay, at whatever school their kid wants to attend.</p>

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<p>kelsmom, So people input incorrect data on the FAFSA – easy enough. But are you saying that when they send in copies of their tax returns, they also falsify those?</p>

<p>LasMa, according to FinAid, many people have done that and worse (ie. claiming other kids in school, or even parents, before FAFSA rules changed). I think that’s the real reason behind the IRS data transfer…it’s way too easy for the unscrupulous to change numbers and simply print out a new copy!</p>

<p>I have often wondered why the gov can’t just use your tax return to then decide if you qualify for any fed. aid, and what the EFC would be.</p>

<p>Because your tax return doesn’t list the value of all your assets. For instance… A person can have tons in the stock market, yet only the year’s profit is what get’s reported.</p>

<p>Wish the “State & Local Taxes Paid” were put in on the FAFSA and the CSS PROFILE by the applicant, not calculated at some erroneous rate, tied into FAFSA & PROFILE tax rate tables. </p>

<p>If you live in one state & work in another state, your state and local taxes paid are going to be understated on the FAFSA & PROFILE. Go use the EFC calculators on the Collegeboard website for “IM” & “FM”, then compare your “State & Local Taxes” to what you actually paid! You might be surprised! State & Local Taxes Paid are deducted from your AGI, as well as the Federal Income Taxes Paid (which you enter yourself).</p>

<p>Awarding institutional funds at a Profile school is often an art, which includes enrollment management.</p>

<p>I have often wanted to compare finaid to this: Granny says, for your birthday, she’ll get you what you need. From her blog, you know cousin Lenny got new car, through her generosity. The mechanic says you need a new car. Your spouse says you need a new car. Your kid reallly wants you to have a new car. You don’t have enough cash in the local bank account to buy it yourself. And, my, aren’t you surprised when Granny gives you socks and underwear.</p>

<p>Silly example. Is that fair? Not if Granny promised you a new car at no cost to you. What if all she offered was to review your income and assets and determine your needs by her own formulae? Maybe all Granny did was “meet the gap” between what she decided Lenny’s resources were and the cost of the car. That could have been a gift…or a loan…or maybe she loaned half what he needed and he got his own loan for the rest. Or, yeah, maybe she does like Lenny better. </p>

<p>I have my own complaints about the process, the terms I don’t understand, the inconcistencies, etc. But, DH and I are incredibly grateful for the aid our kids were given. I sometimes call it a “gift,” in the sense that it is not an entitlement. </p>

<p>I don’t mean to outrage anyone. There are smart parents on CC who have really tried to understand, research further, pose solid questions, etc. I sometimes get annoyed at those who write, “Well, I assumed,” or “But I thought…” And, I really feel awful for the not-so-savvy parents, who may not understand the basis for the Fafsa and Profile, at all, because of language or other barriers, intellectual or experience-wise.</p>

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<p>Sorry.</p>

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<p>I completely understand where you’re coming from and I too wonder how many kids are taking too much in loans because they never learned the FA process. Just this morning I received an inquiry from someone who probably should have been Pell eligible but misunderstood the FAFSA process and ended up borrowing instead. I think I’ve logged a lot of hours learning various aspects, but with individual schools having separate policies, aid programs and regs ever changing and evolving, etc. there’s always more to learn…I can’t imagine how difficult it is for those without adult help or with language barriers! Sometimes it’s an art just figuring out what the right questions to ask are!</p>

<p>I’d like to see EFC changed to Eligibility for Federal Grants & Loans (EFGL).</p>

<p>I also wonder what real value – from the federal perspective – there is in any kind of an asset test. Eliminating it is not likely to make a huge percentage of people eligible for either Pell grants or subsidized loans, and getting rid of it would eliminate one of the barriers for a lot of families. </p>

<p>On the income front: tax services (like TurboTax) already have the capability of electronically importing W2s and 1099s from many employers using the control numbers printed on each form – is there some reason why the on-line FAFSA shouldn’t have the same capacity? It wouldn’t handle every W2 or every 1099, but it would likely handle enough to materially reduce errors and quite a few intentional understatements, and also greatly simplify any verifications going forward.</p>