Commandment #4: Simplify and reduce or eliminate for non-poor students federal financial assistance programs
by Andrew Gillen
As college has become expensive, more and more students are turning to financial aid. However, both the process and the outcome of financial aid currently leave much to be desired. Two changes to financial aid could significantly improve higher ed.
First, murder the FAFSA.
This monstrosity imposes large costs on students, schools and the government. The bulk of these costs are unnecessary - the distribution of aid is not affected to a significant degree by the radical reduction in the number of questions (see this paper by Susan Dynarski and Judith Scott-Clayton). Moreover, the complexity and confusion lead many students who would qualify for means tested aid to avoid applying altogether. While we favor reforming the entire aid calculation, merely simplifying the existing form would still be a huge improvement.
Second, eliminate financial aid for non-poor students.
Aid is currently too widely available. The Department of Education reports that 35.4% of dependent students from families making $100,000 or more received Federal Stafford loans, and 15.6% received the subsidized kind. The Government Accountability Office reports that just under a third of all unsubsidized Stafford loan dollars went to families making more than $100,000.
This has two main drawbacks. One, for any given amount of aid money, giving more to the well off means there is less available for the not so well off. Two, as our recent report documents, when financial aid is too widely available, it results in higher tuition. Higher tuition, of course, is the opposite of what financial aid programs are supposed to achieve.