Applying for Aid Earlier Would Help Needy Students, Report Says

What if students received their financial-aid packages earlier in the year, giving families more time to prepare to pay for college?

That would be possible if financial-aid eligibility were based on two-year-old tax data, rather than the year-old data used now. A report released on Monday by the National Association of Student Financial Aid Administrators considers the implications of switching to the older data, called “prior-prior year” data. The report, which was supported with a grant from the Bill & Melinda Gates Foundation, explores research that was first presented at the association’s conference this past summer, and also makes policy recommendations.

If the change were made, fewer students would miss important aid deadlines in the scramble to gather tax information, the report says. Low-income students would benefit the most from an earlier aid process, according to the report, as their expected family contribution varies the least from year to year.

Under the current system, applicants can begin filling out the Free Application for Federal Student Aid starting on January 1. In order to qualify for first-come, first-served state and institutional aid, students are encouraged to fill out the form well before tax returns are due.

The use of two-year-old data could shift that timeline. The report outlines how students applying for the 2013-14 aid year, for example, could have begun filling out the Fafsa as early as September 2012 using tax information from 2011. Applicants might have gotten more state and institutional aid, and might have received their award letters as early as January 2013, according to the report.

The report recommends that the U.S. Department of Education start using the older tax data. It also recommends allowing more groups of tax filers, such as those who file under “head of household” and “married filing separately” statuses, to use the data-retrieval tool that allows aid applicants to transfer information from the Internal Revenue Service to the Fafsa.

And even while the association supports using prior-prior-year tax data, it encourages the Education Department to keep in mind that some students’ financial situations won’t be presented as accurately.

The researchers who prepared the report analyzed approximately 73,000 students who filed the Fafsa for two consecutive years under the same dependency status between the 2007-8 and 2011-12 academic years.

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