New Research Provides Further Support for Shift to Using Prior-Prior Year Income Data on FAFSA

Quick Takeaways: 

  • The cost of shifting from prior-year (PY) to prior-prior year (PPY) tax data would be $29 million dollars.
  • 70 percent of applicants saw no change in their Federal Pell Grant eligibility when shifting from PY to PPY.
  • Less than 25 percent of FAFSA filers used the IRS Data Retrieval Tool.

By Charlotte Etier, Research Analyst 

As efforts surrounding FAFSA simplification increase, many scholars are starting to take a look into what methods may be most effective. Using a sample of over 40,000 students from the National Postsecondary Student Aid Survey (NPSAS:12), a recently released report showed 70 percent of applications saw no change in their Federal Pell Grant eligibility when shifting from the use of prior-year (PY) to prior-prior year tax (PPY) data. Evidence from “Revisiting FAFSA Simplification: Expanding Access to the IRS Data Retrieval Tool” examines previous efforts to simplify the FAFSA, highlights the benefits of a more simplified application process for students and families, and finds that the FAFSA could be radically simplified with little effect on aid eligibility.

According to report authors Susan Dynarski, a professor at the University of Michigan, and Mark Widerspan, a doctoral candidate at the University of Michigan, the most recent NPSAS:12 shows most FAFSA applications are submitted in February, before the IRS Data Retrieval Tool (DRT) is available, and less than 25 percent of FAFSA filers use the IRS DRT. The researchers go on to further examine ways to simplify the aid process including the use of PPY tax data, the use of only items collected by the IRS (thus eliminating the FAFSA), and a combination of these two methods. Data from over 40,000 undergraduates in NPSAS:12 who filed a FAFSA for academic years 2011-12 and 2012-13 is used to calculate aid eligibility on both years for comparison.

Findings indicated:

  • When calculating eligibility by comparing PY to PPY tax data Pell eligibility shifted as follows:
    • 70 percent of applications saw no change
    • 81 percent saw a change of less than $500
    • Overall average Pell Grant increased by $37
     
  • When changing the formula to calculate eligibility based on only items collected by the IRS, Pell eligibility shifted as follows:
    • 75 percent of applications saw no change
    • 79 percent saw a change of less than $100
    • 90 percent saw a change of less than $500
    • Overall average Pell Grant decreased by $50
     
  • When calculating eligibility by combining the two methods above, Pell eligibility shifted as follows:
    • 68 percent of applications saw no change
    • Overall average Pell Grant decreased by $51  
     

The findings conclude that simplification of the aid process would have with little effect on aid eligibility and allow students and families a much earlier application window and award notification time, overall giving students a better opportunity to choose an option that is best for them. NASFAA has long advocated for a move to PPY and a recently presented report, “Great Expectations: Implications for Implementing Prior-prior Year Income Data for the FAFSA,” which also discussed the time lapse between FAFSA filing and IRS DRT utility, and called for a shift from PY to PPY income data on the FAFSA.

 

Publication Date: 5/26/2015


Joel T | 5/28/2015 8:33:40 AM

Is there any research that shows how many students will require professional judgment if PPY is implemented?

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