The complexity of the student aid programs and the application process make it difficult for students and parents to predict how financial aid they should expect and discourages students from applying for aid. In addition, the complexity creates large administrative burdens for campuses that must direct scarce resources to administer financial aid, when these resources could be more effectively used to benefit students.

“I’ve spent most of my career making poor kids prove they are poor,” a financial aid administrator recently commented to NASFAA, highlighting how the current complexity of the system is causes inefficiency and frustration.

NASFAA’s National Conversation Initiative (NCI) Preliminary Recommendations Report makes eight recommendations to simplify the application process to eliminate the problems caused by the current complexity. The system envisioned by NASFAA would reduce the number of questions on the FAFSA by 70 percent - from 106 questions to roughly 30 questions -  and 10 of these questions would be simple demographic questions such as: name, address, date of birth, etc. The nation’s neediest students would auto-qualify for maximum aid – so their application process would be even simpler. NASFAA also recommends that financial data be gathered through data matches from other sources, such as the Internal Revenue Service (IRS).

The result would be a dramatically simplified student aid application process that makes it easy to determine and understand eligibility and more families to apply for the assistance they may qualify to receive. At the same time NASFAA’s model would effectively differentiate truly needy students from those who merely appear needy on paper to ensure integrity in the student aid system.

The following are NASFAA’s simplification recommendations:

1.     Streamline the FAFSA application so that it collects only demographic, student eligibility, and dependency status data

2.    Students and their families who are not required to file taxes due to low income, or who receive means-tested federal benefits, should automatically qualify for the maximum Federal Pell Grant

3.    Give schools the option to waive reapplication every other year for individual students or for groups of students whose circumstances have not changed significantly, as identified by the institution

4.    Allow families to initiate the financial aid application process through the federal tax system

5.    Provide look-up tables for students and families to show them how much they would qualify for in Federal Pell Grants and loans

6.    Eliminate “needs analysis” and use an “eligibility analysis” that relies on Adjusted Gross Income and tax exemptions to determine the amount that financial aid applicants can expect to receive in a Federal Pell Grant

7.    Use relevant tax schedules for independent students or parents of dependent students to gain a more accurate picture of their financial aid eligibility

8.    Eliminate all non-financial aid related questions from the application process,( e.g., Selective Service Registration, drug convictions)

One aspect of NASFAA’s NCI preliminary recommendations is a new approach to student loans that would replace the Federal Family Education Loan Program, the Direct Loan Program, and the Federal Perkins Loan Program with a program that integrates the best aspects of all three. This new loan program would incorporate current FFELP participants to ensure a high level of customer service and maintain valuable borrower services like financial education and default prevention.

This new, integrated loan program would be simpler and more equitable for students while expanding the amount of capital available to make loans through the capital markets. The proposed loan model also encourages all beneficiaries of postsecondary education (i.e., borrowers, state governments, private employers, friends and families, and all Americans) to help pay down borrowers’ debt levels and raise capital for a self-sustaining loan fund.

NASFAA has been receiving questions from members about the proposed loan model and has posted some common questions and answers. We will continue to post answers to common questions as we receive them.

The proposed loan program would:

• Subsidize student loan borrowers during repayment - instead of while they are in school
• Decrease student loan burden by strengthening the Income-Based Repayment program so students never pay more than 10 percent of their discretionary income and loans are forgiven after 20 years of repayment.
• Provide consistent and equal terms, conditions, and benefits to all borrowers
• Offer a seamless loan origination, disbursement and repayment experience for students
• Ensure a predictable and continuous source of capital for student loan funding that isn’t dependent on any single entity
• Reduce federal expenditures by creating a self-sustaining funding source that relies on new, safe investment vehicles
• Leverage technological and business innovations in the private sector by creating a common servicing platform that relies on a centralized database of all borrowers and can be used by multiple servicing agents
• Creates new incentives for businesses, individuals, and states to help students repay student loan debt
• Capitalizes on the expertise and best practices developed by all entities currently participating in the existing loan programs
• Is not the FFEL, Direct Loan, or Perkins Loan program, but rather an entirely new loan program created from the most positive aspects of all three

We are curious about what you think of NASFAA’s proposed loan model, so please post any comments, questions or concerns you have about the proposal.