Financial aid reform has become a hot political topic in Washington as of late, with legislation introduced or pending from Senate Democrats, House Republicans, and the bipartisan pair of Senators Lamar Alexander (R-TN) and Michael Bennet (D-CO). (Here is a nice summary of the pieces of legislation from the National College Access Network.) All three of the proposals support the use of “prior prior year” or PPY, which would advance the financial aid application timeline by up to one year. Given the bipartisan support, this policy change may end up happening.
PPY could affect the deadlines for state financial aid applications in ways that could help some students and hurt others. (It could also affect institutional deadlines, but that’s a topic for another post.) Some state aid deadlines listed on the FAFSA are currently well before tax day on April 15, making it difficult for students to take advantage of the IRS Data Retrieval Tool that automatically populates the FAFSA with income tax data but takes up to three weeks to process. For example, five states (Illinois, Kentucky, North Carolina, Tennessee, and Vermont) recommend filing “as soon as possible” after January 1 in order to get funds before they run out. At least 15 states currently have deadlines before March 2, nearly six months before the start of the following academic year.
The below table shows the percentage of all students who filed the FAFSA in the 2012-13 academic year (the most recent year with complete data available) by March 31 and June 30 by state and dependency status. There are two notes with the table. First, it only includes states with deadlines listed on the FAFSA, as other states are either unknown or on a first-come, first-served basis. Second, application data by state are only available by quarter at this point, although the good folks at Federal Student Aid have told me they hope to release data every month in the future.
|Percent of FAFSAs Filed by State, Date, and Dependency Status|
|Applications Filed by 3/31||Applications Filed by 6/30|
Source: Federal Student Aid data.
Among the 17 states with stated deadlines before March 31, Indiana students were the most likely to file by March 31 (with a March 10 deadline) and Florida students were the least likely to file (with a March 15 deadline). The differences (82% vs. 43% for dependent students and 53% vs. 30% for independent students) reflect the universality of Indiana’s state financial aid program compared to the much more targeted Florida program. In all states, dependents were far more likely to file by March 31 than independents, meaning that independent students were much less likely to even be considered for state financial aid programs. Students were more likely to file by March 31 in states with earlier aid deadlines, as evidenced by a correlation coefficient of about -0.55 for both independent and dependent students.
By June 30, all but three states (Mississippi, Minnesota, and Ohio) have had their state aid deadlines, but only about 81% of dependent and 63% of independent students have filed their FAFSA by that point. Some of these students may choose to enroll in college for the spring semester only, but many are still planning to enroll in the fall semester. These students can still receive federal financial aid, but will miss out on state aid. The correlation between state aid deadlines and the percent of applications received by June 30 is lower, on the order of -0.4.
So what does this mean? About 20% of dependent and 35% of independent students are likely to miss all state application deadlines under current rules, and about 60% of independent students currently miss state aid deadlines before March 31. These students are likely to have more financial need than earlier applicants, but are left out—as shown by recent research. A shift to PPY is likely to move up these state deadlines as states are unlikely to provide more money to student financial aid. The deadlines serve as a de facto rationing tool.
There are better ways to allocate these funds. Instead of using a first-come, first-served model by setting an artificially early deadline, states could give smaller awards to more students or assign grants via lottery to all students who apply before the start of the fall semester (say, August 1). Susan Dynarski made an important point regarding the current system on Twitter:
States need to consider whether their current application deadlines are shutting out students with the greatest financial need, and whether a move to PPY at the federal level will affect their plans. It is abundantly clear that the current system can be improved upon, and I hope states act to do so.