THE ADVISORY COMMITTEE ON STUDENT FINANCIAL ASSISTANCE

February 2, 2001

Ms. Vivian Reese

Dear Ms. Reese:

The Advisory Committee on Student Financial Assistance is pleased to respond as required by section 491
of the Higher Education Act, to the December 4 Federal Register notice regarding the 2002-2003 Free
Application for Federal Student Aid (FAFSA). The Committee recognizes the Department of Education’s
(the Department) efforts to reduce burden and simplify the application process to deliver federal, state and
institutional aid to millions of Americans. Nevertheless, while the Department’s commitment to
streamlining and simplifying the application process is evident, the Committee believes that other
opportunities to reduce burden and improve the overall performance remain. Specifically, the Department
should: ensure that systems are operational and reliable; encourage the use of FAFSA on the Web;
continue to field test its forms on a regular basis; supply institutions with the Verification Worksheet on a
timely basis; implement the automatic zero estimated family contribution (EFC) calculation and reinstate
the simple needs test; implement the Internal Revenue Service (IRS) data match with reported income;
and continue to accommodate the needs of states and institutions.

System Reliability

The Committee is pleased with the Department’s decision to begin the 2001-2002 FAFSA processing
cycle almost two weeks earlier than it has in previous years, however, it is concerned by the difficulties
many families and institutions experienced during system start up. Specifically, students and their
families experienced prolonged wait times and repeated data loss when filing via FAFSA on the Web.
Members of the financial aid community have expressed their concern over the reliability of the
processing system and their frustration that, “each year something goes wrong.” As a result, institutions
have been forced to require students to complete additional forms in order to receive information in a
timely and accurate fashion and to distribute awards that are critical in students’ decisions to attend one
school or another. In order to reap the maximum benefits from the newly implemented processing cycle,
the Committee urges the Department to take steps to ensure that the system is operational and reliable.
This action will minimize burden on: students and families, by allowing them to receive their Student Aid
Reports sooner in order to determine their eligibility for federal student financial aid; and institutions, by
allowing financial aid administrators to supply students with their institutional financial aid packages
earlier than in prior years.

FAFSA on the Web

Increasing the use of FAFSA on the Web holds the greatest potential for reducing burden for students and
parents. The Committee commends the Department for encouraging over 3.2 million students to file
electronically during the 1999-2000 academic year. However, less than 1.5 million of those forms were

Ms. Vivian Reese

filed using FAFSA on the Web and the reapplication on the web function combined. FAFSA on the Web
reduces error rates and decreases processing times so that students may receive their financial aid
packages in a more timely manner. In order to further enhance the simplification of the application
process, the Committee urges the Department to intensify its efforts to promote the use of FAFSA on the
Web.

In addition, the Committee expresses its concern over comments made by members of the financial aid
community which reflect their reluctance to rely on FAFSA on the Web. Students and parents have
grown accustomed to the speed and ease associated with using the internet. Therefore, deficient server
capacity significantly increases the application time and will serve as a deterrent for families considering
filing via FAFSA on the Web. Financial aid administrators will face great difficulty convincing families
to apply using this method if it is not improved. Server capacity issues must be addressed and tested prior
to system start up in order to accommodate all potential users.

Consistent Field Testing

The Department should continue to routinely field test the FAFSA and all of its other forms whenever it
plans to make any major changes prior to publication. In keeping with such practice, the Committee
commends the Department for its careful review and use of focus groups for the 2001-2002 FAFSA, in
particular question 35, commonly referred to as the “drug question.” In accordance with statute, the
Department added the drug eligibility question on the FAFSA to limit Title IV aid for those students
convicted of certain drug offenses.

In light of prior complications that students and institutions experienced with this question due to the
confusing wording and lack of guidance provided by the Department, the Committee is pleased with the
repositioning and rephrasing of the drug question. The Committee urges the Department to continue the
focus group experiments it administered prior to its release of the 2001-2002 FAFSA and implement
additional field testing in order to further reduce complications in the processing and awarding of federal
financial aid.

Supplying Verification Worksheets in a Timely Manner

The Committee has heard from a number of financial aid community members who have expressed their
discontent with the timing of Verification Worksheet delivery to their institutions. As system start up has
been pushed up by almost two weeks for the 2001-2002 processing schedule, it is important that copies of
the Verification Worksheet be available for administrators to distribute upon receipt of Institutional
Student Information Records (ISIR) flagged for verification. Not having this paperwork available to them
could create a back up of application files waiting to be completed and packaged. The Committee has
heard from members of the financial aid community whose institutions, in efforts to avoid any
unnecessary back up in application processing, require students to complete additional forms to collect
the necessary data. This practice contradicts the Committee’s earlier request for the Department to
accommodate the needs of all states and institutions with the single FAFSA form. Therefore, in order to
further simplify the application process and reduce institutional delays in packaging, the Committee urges
the Department to accelerate its time line for updating and delivering copies of the Verification Worksheet
to institutions.

Ms. Vivian Reese

In light of the Office of Postsecondary Education’s emphasis on the need to address the complexity of the
application process, the Committee feels that two provisions already in law, but not adequately
implemented, can further reduce the burden for low-income students: the automatic zero calculation,
which assigns an EFC of zero to applicants who meet certain tax filing and income criteria; and the
simplified needs test−printed on the FAFSA form until recently−which serves to reduce the amount of
data that the neediest students and parents are required to provide.

The Committee believes that implementing both provisions on the paper and electronic applications could
dramatically simplify the process for students and parents for whom the form is most intended to serve.
By virtue of the automatic zero calculation provision placed in the Higher Education Act of 1992, the
lowest income families have been automatically eligible for maximum levels of Pell Grants and other
forms of aid based solely on their income. Nevertheless, these families currently are required to complete
the entire application form even though their eligibility is a certainty. Similarly, all other low-income and
many moderate-income students and families are eligible to complete a reduced form for the simple needs
test, but those who complete the paper application form, 70 percent of all applicants, are currently
required to complete the entire form. Failing to reduce the number of variables necessary to fulfill the
requirements of these provisions may impose unnecessary barriers and burdens upon those families most
in need of federal student financial assistance. Therefore, the Committee strongly urges the Department to
implement the simplified needs test and the automatic zero calculation on the paper and electronic FAFSA
application forms without delay in such a manner that they do not cause undue burden on other
applicants. In addition, information about these calculations should be printed clearly in the Student
Guide and The High School Counselors Handbook. Publication of such information in materials used to
assist students in the application process is essential to the overall simplification of student financial aid
delivery.

IRS Data Match

The Committee commends the Department for its efforts in pursuing a data match of reported income
with the IRS, but is concerned that the match is not likely to be implemented any time soon. On the
2001-2002 FAFSA, the Department added data lines for two parental social security numbers and two
parent last names on the FAFSA, in compliance with section 484(q)1 of the Higher Education Act (HEA).
This section states that, “the Secretary of Education is authorized to confirm with the IRS the adjusted
gross income, filing status, exemptions and mailing addresses reported by SFA applicants on their federal
income tax returns for the purpose of verifying the income students and parents report on student
financial aid applications.” This addition to the 1998 HEA came on the recommendation of the Inspector
General’s (IG) Office and the Advisory Committee, each of which advised the Department to implement a
requirement for the Secretary of Education and the Secretary of the Treasury to verify information
reported by student financial aid applicants against IRS returns.

According to Department officials, the Department has been participating in a pilot test of electronic
matching of income data with the IRS. Although progress has been moving along, the Committee has
been told that IRS officials question their agency’s legal authority to perform the match with the
Department. Also, we understand that the Department and the IRS are currently conducting a statistical
study from a sample of 2000-2001 Title IV applicants and that the Department is developing software that
Ms. Vivian Reese
February 2, 2001
Page 4

would produce some statistical reports. Preliminary results are not expected to be available until
February. Therefore, despite the additions to the FAFSA, the Department will be unable to
implement the IRS data match for the 2001-2002 academic year. The Committee commends the
Department on its efforts to work with the IRS to implement the data match and strongly urges the
Department to implement the change as soon as possible.

Accommodate the Needs of States and Institutions

The Department must keep the needs of a broad array of users in mind to ensure the FAFSA’s
effectiveness. The Department took steps in implementing the 1992 Amendments to change the function
of the form to create a partnership between states and institutions in administering the Title IV programs.
Congress also signaled its support through the 1998 Amendments. As a result, 48 states now use the
FAFSA exclusively to award over $3.6 billion dollars in state grant aid annually. Also, the majority of
institutions use the FAFSA to administer institutional awards which accounted for $13.3 billion dollars in
1999-2000. Any change in the data elements could cause states or institutions to require students to
submit additional forms and data. Therefore, the Committee urges the Department to continue to
accommodate the needs of states and institutions and keep in mind the universal use of the FAFSA when
considering any system change or form redesign. For example, institutions with large amounts of
institutional aid should retain the ability to have their students complete the entire form.

Finally, any changes offered in the name of simplification, such as modification or deletion of critical data
elements required by states and institutions, that would make major funding sources less likely to use the
FAFSA and federal delivery process would surely undermine access.

As always, the Advisory Committee members and staff appreciate the opportunity to submit our
recommendations. If we can be of further assistance, please do not hesitate to contact the staff.

Sincerely,

/s/

Dr. Juliet V. García

Enclosure

cc: Advisory Committee members

1280 Maryland Avenue, S.W., Suite 601, Washington, D.C. 20202-7582 Tel: 202/708-7439 Fax: 202/401-3467

An independent committee created by Congress to advise on student aid policy