Washington, DC, October 21, 2013 -- The National Association of Student Financial Aid Administrators (NASFAA) has released the final report of its prior-prior year (PPY) income tax study, “A Tale of Two Income Years,” funded through a Bill & Melinda Gates Foundation grant. NASFAA asked whether using two-years’ prior income tax data on the federal student aid application (as opposed to one-year prior) could potentially provide students and families with earlier award notification—and whether Federal Pell Grant awards would change with a move to PPY.
The study offers data which supports PPY recommendations made in NASFAA’s July 2013 Reauthorization Task Force report and shows that moving to PPY could potentially provide needy students and families with the information they need to make financial decisions earlier in the process—and would not significantly impact Pell Grant awards for the neediest groups.
Currently, students and families submit a Free Application for Federal Student Aid (FAFSA) populated with prior-year (PY) income tax information. The window to apply for financial aid is a tight one, considering that most students and families may not have their income taxes completed and filed by the time they submit the FAFSA.
Under the existing structure, delays can cause an unfavorable chain reaction: a delay in completing the income tax return can mean postponing FAFSA submission, which can result in later financial aid notification—and possibly a reduced amount of financial aid. This occurs because some forms of financial aid have a limited pot of funds, which are distributed on a first-come, first-served basis.
Policymakers and student advocates have long hypothesized that under a prior-prior year (PPY) system, students could:
The study showed that dependent students from very low-income families and independent students with dependents of their own (two of the neediest cohorts) could be ideal candidates for PPY because even some income variability from year to year does not affect their aid eligibility. The report also outlines ways to mitigate negative consequences for students who would not fare as well under a move to PPY, such as proactively identifying these groups early on and exploring unique ways to streamline the professional judgment (PJ) process.
“Our research indicates that PPY should be strongly considered for all the positive benefits it could bring to the poorest students, and students with little change in EFCs from one year to the next—which includes a significant number of middle-income students,” said NASFAA President Justin Draeger. “A move to PPY could greatly streamline the FAFSA process for these students and free-up more time to plan and prepare for college costs. As we look toward the next reauthorization of the Higher Education Act, we encourage Congress to consider the PPY recommendations put forward by NASFAA’s Reauthorization Task Force and the supporting data from this study.”
The study concludes with three general policy implications related to the use of PPY data:
1. The Department of Education should implement the use of PPY.
2. The Department of Education should explore ways to mitigate potentially negative effects of PPY.
3. The IRS Data Retrieval Tool should be expanded to include more taxpayers and more fields from federal tax returns.
NASFAA spokespeople are available to shed more light on the study and its implications. Please contact email@example.com or (202) 785-6944 to set up an interview.
The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents nearly 20,000 financial aid professionals at more than 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every ten undergraduates in the U.S. Based in Washington, DC, NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. For more information, visit www.nasfaa.org.
Publication Date: 10/21/2013