Senators Lamar Alexander (R-TN) and Michael Bennet (D-CO) introduced the bipartisan Financial Aid Simplification and Transparency (FAST) Act in the 114th Congress on January 7. The bill, designed to simplify the federal financial aid system, introduces provisions to streamline the application process while improving transparency and access, including several issues that NASFAA has been advocating.
The Financial Aid Simplification and Transparency (FAST) Act, would boil award determinations for Pell Grants down to a series of look-up charts based on family size and adjusted gross income. Both data elements would be as reported to the Internal Revenue Service (IRS) and would be retrieved from the IRS for any tax filers.
The chart appropriate to family size would then be used to determine an award amount based on adjusted gross income (AGI) from the prior-prior year. For example, for a student with a family size of four, and a 2012 AGI from zero to $23,850 would receive a full Pell Grant award of $5,730 for the 2014-15 award year. An AGI of $57,241 through $59,625 would result in a Pell Grant of $2,170. The chart does not extend past that income level for a family of four. A family of five would have received $2,170 with AGIs of $66,985 through $69,775, the highest income level for that size family. The AGI cutoff for a family of six would have been $79,925, for an award of $2,170.
Another way to compare the charts is to consider families with the same income but different family sizes. For example, at a family AGI of $39,000, an individual student’s Pell award would have varied for 2014-15 according to family size as follows:
The chart for a family size of 1 cuts off at an AGI above $23,340. The chart for a family size of 8 or more cuts off at AGIs above $102,273. For individuals who received, or whose families received, certain specified means-tested Federal benefits at some time during the previous 24-month period, Pell eligibility is automatic under the bill, but it is unclear whether a student in such a situation would automatically receive the maximum grant or would have to provide additional information that might reduce the grant.
The number of family members in college does not impact any awards under this approach, so there would be no bonus for multiple members in college at the same time; families with 2 children going to college four years apart would be treated the same as families with 2 children going to college at the same time. There would be no recalculation if one family member decides not to attend after all, as is now the case whenever verification requires an updated application.
The bill proposes a highly simplified application in which the required data (identifying information, family size, and income) could be accommodated by a postcard, although it is unclear at the moment how dependency status would be determined. This simplification would be possible because the chart system would replace all of need analysis currently defined in law under part F of the Higher Education Act (HEA). Financial aid administrators would retain the ability to exercise professional judgment but only to allow for treatment of family income or family size.
The Department of Education would be charged with the responsibility of notifying the student of the amount of Pell Grant for which he or she is eligible.
Under the FAST bill, the Pell Grant would be the only grant program for undergraduates. The Federal Supplemental Opportunity Grant (FSEOG) FSEOG Program would be eliminated. TEACH Grant, however, would not be affected. The federal work study program would also remain.
The bill would also propose a single loan program, discontinuing the Direct Loan Program and replacing it with a revised loan program under a repurposed part F of the HEA. Part F loans would have essentially parallel terms and conditions to Direct Unsubsidized Loans, and would be available to undergraduate students, graduate students, and parents or legal guardians of undergraduate students. The bill makes no distinction between dependent or independent undergraduate students, and eliminates differences in annual limits based on year in school. In addition, this new single loan program effectively eliminates the existing Perkins Loan program by allowing it to expire.
Eliminating subsidies would render the current need analysis unnecessary for this loan program, and again the application would be highly simplified. Student loans would be limited to cost minus grants and scholarships that the institution knows about, up to the applicable annual loan limit. Student loans would be included in estimated financial assistance when calculating the amount for parent loans. Schools could still reduce the amount of a student loan, or refuse to certify it altogether, under exceptional circumstances. Schools would still be responsible for determining the amount of the loan and setting disbursement schedules as currently defined.
The annual loan limit would be $8,000 for undergraduates and $30,000 for graduate or professional students, but a provision is made for an institution to allow higher graduate/professional annual limits for students in programs with high need up to a 50 percent increase in their aggregate limitations. The undergraduate aggregate limit would be $37,500; the graduate/professional aggregate limit would be $150,000, which would not include any undergraduate loans.
In a departure from the current Direct Loan Program, loans for part-time students would be prorated based on actual enrollment status. If certain conditions are met, an institution could set a lower loan limit for students in programs of study identified by the school, with a provision for increasing that limit for individual students in the program under special circumstances.
Repayment would begin after a 6-month grace period. The Department would be required to provide information about the two repayment options available to the borrower: the income-based repayment plan and a 10-year plan with fixed monthly payments.
NASFAA will continue to monitor the progress and content of this bill and provide updates as information becomes available. It is unlikely to see any immediate action on the Hill but represents a clear marker for ideas to be considered in reauthorization.
Publication Date: 1/7/2015