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Financial aid is broken

| Wednesday, April 1, 2020

Due to the economic shutdown brought about by coronavirus, federal student loan payments have been suspended until September 30. The inclusion of this reprieve in last week’s stimulus bill signifies the significant role student loans play in the economy. In search of high-paying jobs, individuals take on enormous loans that burden their wallets for years to come. In 2019 alone, 45 million borrowers collectively accrued $1.5 trillion in debt. Massive debt that is difficult to pay back has significant ramifications on society and the economy, including delaying marriage, lowering one’s chances of purchasing a home and harming the growth of small businesses. This is not the purpose of student loans; rather, these loans are meant to assist students in receiving a worthwhile education and becoming productive members of society. Yet, the current system perpetuates a cycle that prevents the true might of the American workforce from being unleashed. 

The source of this problem is the FAFSA, the document that determines how much aid one is entitled to based on income and other factors. The FAFSA is an overly complex form of 180 questions students must complete to access $120 billion in federal aid. Bill Gates explains that the difficulty in filling out the form bars many of its recipients from accessing its benefits. For instance, nearly half of American high schoolers and two out of three low-income seniors do not even submit a FAFSA application. As a result, the high school class of 2017 missed out on approximately $2.3 billion in aid. If the FAFSA was simplified and more accessible, greater aid distribution could occur that better benefits America’s students. Additionally, the complexity of the form increases the likelihood of inaccuracies that will negatively reflect on a student’s aid, further harming his educational capabilities. Karen McCarthy, senior policy analyst at the National Association of Student Financial Aid Administrators, suggests not filling out the FAFSA removes significant opportunities for America’s students that hinder their participation in the economy. 

Moreover, the FAFSA stems from a flawed model. It operates from the perspective of assisting the nuclear family, or two-parent households that only need to support children. It excludes circumstances such as divorce, relatives requiring care, small business owners and other factors. These are situations the average American faces — not the simple cookie-cutter family the FAFSA promotes. Even if these variables are considered, the “check-a-box” nature of the form fails to reflect the nuance of a student’s situation, and thus does not accurately reflect how much aid is required. For instance, during a recession, small businesses suffer and likely cannot afford as much as their assets suggest. Similarly, employees suffer due to a lack of demand and affordability. Yet, the FAFSA still expects 47% of one’s income to go towards college, an amount that is nearly insurmountable for the average American family. As a result, the FAFSA offers a distorted figure that robs students of an affordable, worthwhile education.

Financial aid even fails to achieve its purpose of easing the wealth inequality between wealthy and low-income families. Despite more aid going to low-income students, an increasingly higher and growing share goes towards wealthier families. Additionally, the number of middle-class students attending college has been dropping. According to the Pew Research Center, while 45% of dependent undergraduates in 1996 were middle-class, only 37% were in 2016.

I could go deeper into the statistics, but the message is clear: financial aid is not working for anyone. The money meant to assist those who cannot afford college is not reaching those individuals, and an overly complex application process bars qualified students from accessing these resources. A solution is necessary that addresses the misallocation of aid and provides greater access for applicants. 

Susan Dynarski, a professor of economics at the University of Michigan, provides a simple solution. In a Ted Talk, she explains that to overcome the intimidation of a large, unnecessary application, the FAFSA should be restricted to two questions: What is your income? What is your family size? In fact, she says the form is entirely unnecessary when this information is available from a family’s tax forms. Based on a study from the Gates Foundation, simplifying the FAFSA process led to a significant boost in college attendance for low-income students. The Gates Foundation explains that by adopting this simplified approach, America will see an increase in college attendance and a greater likelihood in graduation. Every $1,000 in aid was found to increase persistence rates by 4%. By adopting this approach, America makes financial aid, and thus college attendance, more affordable and beneficial for the average American student. 

Furthermore, university-led aid and state-funded scholarships should be expanded to ensure that qualified students are given the resources to succeed, regardless of income. More universities are covering the full tuition for students from families earning up to a particular income, such as Rice and Harvard. These initiatives for universities with large endowments is a noble step towards making college more affordable for students. Additionally, state-funded scholarships, such as TOPS in Louisiana, provide scholarships to Louisiana residents who meet certain requirements. This system incentivizes students to remain in their state, and thus contribute to their local economy in a beneficial way. These programs should be adopted on a broader scale to ensure that intelligent students have the financial backing to attend college. 

Now, some may clump this column into the “forgive student loans” or “free college tuition” camp. That is not the purpose of this column. Those are separate ideas that would require a new column to address. Rather, this column argues that the current process of aid allocation is flawed in a manner that harms the average college student, hindering beneficial opportunities. By adopting a simplified approach, aid can be allocated through the proper channels to ensure that America’s students are able to pursue a better education. The current system harms low-income and middle-class families, and it is time to support the families that define this nation’s strength, resiliency, and ingenuity. 

Blake Ziegler is a freshman at Notre Dame from New Orleans, Louisiana, with double majors in political science and philosophy. He hopes his writing encourages others to take an interest in politics and government. For inquiries, he can be reached at [email protected] or @NewsWithZig on Twitter.

 

 

The views expressed in this column are those of the author and not necessarily those of The Observer.

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