Bipartisan Senate Bill Simplifies the FAFSA, Restructures Pell Grant Eligibility

By Megan Walter & Joelle Fredman, NASFAA Staff

Sens. Lamar Alexander (R-TN) and Doug Jones (D-AL) introduced a bipartisan bill Tuesday to simplify the FAFSA and redefine students’ eligibility for need-based federal student aid programs, which includes several provisions included in a scaled-back Higher Education Act (HEA) reauthorization bill Alexander released late last month.

The new bill — the FAFSA Simplification Act of 2019 — would make significant changes to the need analysis formula, and would allow students to preview their eligibility for the Pell Grant award using their adjusted gross income and household size. While the bill rids the FAFSA of a significant number of  questions, it significantly differs from a 2014 bill Alexander introduced that would have stripped the FAFSA down to just two questions and caused concerns from the higher education community. Alexander acknowledged on the Senate floor that feedback from the financial aid community helped lawmakers improve on previous proposals.

“Taking into account feedback from financial aid professionals nationwide, this bill takes a commonsense approach to shorten the FAFSA application, yet still ask enough questions to provide institutions crucial information needed to appropriately disburse billions of dollars of financial aid to eligible students,” said NASFAA President Justin Draeger. “The bill incorporates several recommendations made by the financial aid community and has garnered our support in the process.” 

FAFSA Simplification

The bill significantly reduces the number of questions that applicants would need to answer on the FAFSA. Applicants who identify as nonfilers for tax purposes or recipients of certain means-tested benefits would only be asked to complete basic demographic and benefit-related questions to complete their FAFSA. All other applicants would be required to answer the same introductory questions, and would then go on to have the income information needed to calculate their eligibility for need-based aid transferred directly from the Internal Revenue Service (IRS) to the Department of Education (ED), in place of the IRS Data Retrieval Tool (DRT). While the bill assumes IRS data could be shared directly with ED, doing so is outside the education committee’s jurisdiction and would require separate legislation that passed in the last Congress. Some applicants would also be required to answer asset-related questions if applicable. Questions regarding Selective Service registration and drug offense convictions would be eliminated. 

The simplification proposal in this bill differs from Alexander’s 2014 bill that proposed cutting down the FAFSA to postcard size, with only two questions about family size and household income. While the bill still uses the “two question” concept for determining Pell Grant eligibility, it also creates a new aid calculation that allows institutions to receive income information they need for other aid programs, without the need for schools to create a separate form.

The proposal in this bill also differs from NASFAA’s FAFSA Simplification plan, which would guide applicants through one of three pathways depending on their financial situation, but would still use an index similar to the current expected family contribution (EFC) to determine Pell Grant eligibility. NASFAA’s tiered application would identify applicants who — according to their existing means-tested benefits eligibility and tax filing status — have low presumed financial resources, and would present them with a bare minimum number of FAFSA questions. Families with more complex financial circumstances would answer more FAFSA questions, but the use of prior-prior year (PPY) income data and an expanded DRT would permit more information to be directly imported from the IRS. The FAFSA Simplification Act would implement tiered pathways, but only for developing an index that would be used for packaging non-Pell Grant, need-based aid. 

Pell Grant Determination

In an effort to inform students about their Pell Grant eligibility earlier in the process of applying for federal financial aid, the bill — after consumer testing — would create “Pell Lookup Tables” that would estimate the Pell Grant amount based on students’ family size and adjusted gross income. The bill would create different formulas based on the applicant’s single-parent or two-parent household status. Subsequently, Pell Grant award amounts would no longer rely on the calculation of a student’s EFC, which is a concept Alexander proposed in 2014 along with his bill to create a two-question FAFSA. The number of household members in college would no longer play a role in the determination of an applicant’s Pell Grant eligibility.

The bill mandates that students’ eligibility for the maximum Pell Grant award be based on their income, or their parent’s income, as it relates to the national poverty line and/or tax filing status. Under the bill, the following situations deem a student eligible for the maximum award:

  • If the student, or the student’s parent, was not required to file a federal income tax return;

  • If the student, or the student’s parent, is a single parent and has an adjusted gross income equal to or less than 210% of the poverty line;

  • If the student, or the student’s parent, is not a single parent and has an adjusted gross income equal to or less than 160% of the poverty line;

  • If the student, or the student’s parent, was a recipient of certain federal means-tested benefit programs including the Supplemental Nutrition Assistance Program (SNAP), Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Program for Women, Infants, and Children (WIC), or Medicaid.

Redefining the EFC

The bill renames the expected family contribution (EFC) to the “Student Aid Index (SAI).” Under the bill, the SAI would be used to calculate need for need-based aid programs — not including the Pell Grant — such as the Federal Direct Subsidized Loan program, Federal Work-Study (FWS) program, the Federal Supplemental Educational Opportunity Grant (FSEOG) program, and some state aid and institutional aid. Unlike the EFC, the SAI allows for negative numbers, starting the scale at -$1,500 to help financial aid administrators better differentiate relative levels of student need. The number of household members in college would not play a role in the calculation of an applicant’s SAI.

Any student who is eligible for the maximum Pell Grant award based on the new calculation, as detailed above, as well as any student who identified as a recipient of means-tested benefits, would be assigned their calculated SAI or zero, whichever is lower. Nonfilers would receive an automatic -$1,500 SAI. 

Notably, due to the fact that Pell Grant eligibility is no longer tied to the SAI calculation, a student who qualified for the maximum Pell Grant award would be qualified for an automatic zero SAI, but a zero SAI would not automatically qualify a student for the maximum Pell Grant award, a scenario that could play out for a small percentage of applicants. 

Future Prospects

The narrow focus of the bill stands in stark contrast to the enormity of the conversations that have been had on Capitol Hill surrounding reauthorization of the Higher Education Act. Whether such a narrowly focused bipartisan bill helps or hurts the bill’s prospects remains to be seen. In the meantime, the bill is being supported by NASFAA and the National College Access Network (NCAN) as it moves through the legislative process.

 

Publication Date: 10/22/2019


David H | 10/24/2019 10:39:43 AM

I'm concerned that the new SAI (EFC) would not be adjusted based on a # in college anymore. That will make the new SAI less effective and less accurate.

David S | 10/23/2019 12:57:56 PM

Wow...if your office had a "when will a real Reauthorization bill be passed?" pool and you picked "never," you might actually be out of luck! Progress from the Senate...who would have believed this?

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