For many, Jan. 1 signifies a day of great college football bowl games, highly caloric leftover holiday food, and time with family and friends ringing in the New Year. However, for those working in financial aid offices at colleges or universities across the country, the start of the new year signals the beginning of financial aid season.
On Jan. 1, prospective college students began to log on to the Department of Education’s website to complete the Free Application for Federal Student Aid. This is the beginning of the financial aid process for many families.
Not only does the FAFSA open the door to federal and state assistance, it also provides the framework for how most institutions will package institutional aid for their incoming classes.
Simplification
However, applying for financial aid can be a challenge, especially for low-income and first-generation families. For first-time users in particular, the process can be confusing and intimidating. In an effort to increase access and affordability, policymakers are exploring ways to simplify the process.
For example, this past summer, two senators, Lamar Alexander (R-TN) and Michael Bennet (D-CO) introduced a revised format for the FAFSA. Their argument is that a simplified version of the FAFSA form would remove some of the intimidation, and would encourage more families to apply for financial aid.
Allowing families to use “prior-prior year” (PPY) income and asset data when submitting the FAFSA is another attempt at tackling issues of access and affordability. That is, a student applying for admission for fall 2015 would be using parental income data from 2013.
This provision was introduced last year by Sen. Tom Harkin (D-Iowa), chairman of the Senate Committee on Health, Education, Labor, and Pensions. It has been supported by the National Association of Student Financial Administrators and would provide families with more timely communication and transparency about cost and out-of-pocket expenses.
It appears that the concept of using income data from one year earlier on the FAFSA—which has been an option in the regulations for years—is finally gaining traction.
Under this method, it is likely that students would not have to wait until Jan. 1 of their senior year to complete the FAFSA. Instead, students will likely be able to file for aid in the fall of their senior year, using their (or their family’s) most-recently completed tax returns.
Obvious benefits
Receiving their awards earlier in their senior year would provide admitted students with earlier transparency about cost and also allow them more time to make tuition payment arrangements. Given the momentum this approach has gathered in recent months, colleges and universities would be wise to consider how it will affect their processes and systems on campus.
Here are a few examples of how core university business systems could be influenced by a move to a prior-prior year financial aid framework.
Budget planning: For many private universities, tuition is finalized in the spring for the coming fall. To award students in the fall for the following fall, the budget planning process would have to be moved up to allow time to update cost information in marketing materials, the website and award packages. Public institutions will have to adjust as well, which could require legislative actions.
Value messaging: If admissions and financial aid calendars were more aligned as a result of this change, colleges would have less time in the senior year to market their value propositions with strong ROI and brand messaging. If the financial aid package is presented without those complementary messages, families may be quick to cross an institution off their list. That means that value messages must be communicated earlier in the process, when students are sophomores or juniors in high school.
Recruitment planning: Historically, the heaviest travel takes place in the fall, with counselors hitting the road for their annual circuits of college fairs and high school visits. If financial aid awarding occurs earlier, critical recruitment processes may have to be adjusted as well. For example, fall campus visit events may need to include time for financial aid counseling, and communicating the value proposition to juniors may become more important during spring travel.
Net price calculator: The NPC was designed to give families an accurate picture of net price before having to complete the FAFSA. With the financial aid calendar moved up, the value of the NPC may be diminished. If the NPC remains a federal mandate, it will be important that the most recent year’s tuition and fees—as well as merit/need-based policies—are programmed into the NPC and provide accurate and up-to-date information.
Processing of aid applications: Families filing for assistance earlier requires aid offices to be prepared to issue awards earlier, in order to remain competitive. This may also require institutions to estimate state and federal aid awards earlier.
Greg Orwig, vice president for enrollment planning at Whitworth University in Washington, says: “It remains to be seen whether decisions about state and federal aid can be made early enough for fall awards to be complete and accurate, rather than estimates.”
Awards are often based on estimates or projections of state aid because the legislative process stretches into late spring, he adds. “Relying on estimates for state and federal aid would be unavoidable if award packaging moves to the fall—unless legislatures and Congress set funding levels for at least one year ahead,” Orwig says. “But it’s hard to imagine that happening any time soon.”
Appeals: With more time between receiving an aid award and the deadline for enrollment decisions, will more families appeal their students’ awards? Maybe, but it is possible the number of appeals will just be spread out across more time. It is also possible that more families will appeal because their financial circumstances may have changed since the tax year upon which the award is based.
In any event, be prepared for an earlier start on appeal season. More aid offices will be receiving appeals before they have a clear idea of how the entering class is shaping up. This argues strongly for implementing award policies designed to support institutional enrollment goals so your first offer is your best offer.
It may also be important to clearly establish a timeline for responding to appeals that will enable you to hold off on responding to early appeals—at least until you’re in a better position to see what the enrollment and revenue picture will look like.
May 1: Known as “National College Decision Day,” May 1 is when students make known their decision to colleges by submitting their enrollment deposits. The May 1 deadline could lose some of its significance if PPY is adopted.
Jon Boeckenstedt, associate vice president of enrollment management for policy and planning at DePaul University in Illinois says: “A move to prior-prior year means students wouldn’t have to apply to as many colleges to ensure they have an affordable option because they would know costs up front. Applications could fall, and colleges who define themselves by a low admit rate might struggle to make sense of the new reality.”
Making yield projections could be nearly impossible in the first couple of years, meaning colleges will not know how many students to admit to a class, he adds.
Boeckenstedt also says there could be a ripple effect from May 1 losing significance. “If students no longer have to wait until May 1 to know final costs, colleges could institute several application cycles, and insist on earlier deposits—a sort of multiple early decisions on steroids,” he says. “As spots become filled in each cycle, fewer are available in the next.”
The prior-prior year option certainly has the possibility of benefiting families as they search for the right college. It also provides some significant advantages to institutions. For example, fewer families will likely require verification because they will be applying for aid using completed tax returns, rather than estimates. And aid offices will have more time to complete verification on those students who are required to provide additional materials.
However, it is also important that college leadership begins to think about how this transition will impact recruitment and budget cycles, as well as other operations.
Rachael Russiaky, director of student financial services at Trinity International University in Illinois, says the conversion could prove challenging:
“The first year of transition has the potential of being rather clumsy for institutions because of the need for adjusting our timing, preparing our systems, and finalizing our tuition for the next award year. Although service may suffer from every institution, the institutions who strategically plan ahead will gain an advantage over those who do not.”
Aaron Mahl is a consultant with Scannell & Kurz.
