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This year’s failed roll-out of the “simplified” Free Application for Federal Student Aid (FAFSA) has generated a great deal of angst and uncertainty among students and institutions – and finger-pointing among pundits and policymakers as to who is to blame for the failure. To be sure, the current administration’s obsession with the illegal transfer of student loan obligations from borrowers to taxpayers and their hunger to rewrite regulations that were promulgated by consensus during the Donald J. Trump Administration, likely contributed to the failed launch.
But as a former acting Undersecretary of Education, I know that the underlying challenges run much deeper than that. The real problem is that in passing the Affordable Care Act, Congress transformed the Department of Education from a marginally competent regulatory and guarantee agency into one of the nation’s largest banks without ensuring that it acquired the tools, technologies, expertise, personnel, and resources needed to carry out that function responsibly. The failed FAFSA roll-out is merely a symptom of a much larger problem.
Congress transformed the Department of Education from a marginally competent regulatory and guarantee agency into one of the nation’s largest banks without ensuring that it acquired the tools, technologies, expertise, personnel, and resources needed.
But let’s be honest about the fact that FAFSA simplification is a bit of a gimmick. For years, Senator Alexander (R-TN) trudged to the Senate floor the spooled computer paper that listed every possible question a student or parent might be asked when completing the legacy FAFSA application. This dog-and-pony show gave Senator Alexander an identity, but it was somewhat misleading since it was the rare student or parent who had to answer every question on the form. The Department had already accomplished the most important components of FAFSA simplification by transitioning from a paper application to a smart form and by transitioning from the use of prior year tax data to prior-prior year. By using the smart electronic form, most low-income students had to answer only a few questions to become eligible for full aid. The transition to “prior-prior” year data eliminated the need for students and parents to complete their tax returns prior to April 15th, just so they could complete the FAFSA on time. These two changes were the most significant contributors to FAFSA simplification, and they were in place years prior to the recent FAFSA simplification legislation.
It is true that the new FAFSA form contains fewer questions, but in some ways, the new form is more complicated than the old one because it requires parents to do more work in the background to enter an answer into the form. Whereas the old form may have asked more questions so that the Department could calculate the answer using its own algorithms, now parents are required to perform the calculations themselves and report only the final result. This makes the form shorter but the process more complicated and more error prone.
The main challenge the Department faced in “simplifying FAFSA” is that the agency needed to connect its antiquated data systems to IRS’s more modern and secure data systems. Maintaining up-to-date and secure IT systems is extremely expensive and generally requires agencies to issue contracts to outside vendors. The contracting process is cumbersome, takes much too long, is subject to challenges by unsuccessful bidders, and usually attaches high fees to change orders – which are necessary when Congress keeps changing its mind about how it wants the agency to proceed. When congressional appropriations are late and the government is running under a continuing resolution, new contracts cannot generally be issued, so these efforts can be delayed by 6 months just because Congress can’t get its act together. In the case of FSA, the contracting process is made more difficult because many of its IT systems are so old that they are programmed in Cobol, and it is very difficult to find contractors who can work in that language. On top of all of that, the agency is required to select the lowest bidder for the contract or select the bidder that enables the agency to meet its small business and diversity goals, which sometimes means that the agency cannot select the best contractor for the job. Aging IT systems were a major contributor to the failed FAFSA roll-out.
The failed FAFSA roll-out is merely a symptom of a much larger problem.
Ironically, Secretary DeVos recognized early in her tenure that FSA data systems needed to be upgraded, and she launched the NextGen Initiative to modernize these systems – or at least the user ends of them. But Congress did everything it could to derail this project. An accomplishment by Betsy DeVos did not play well amongst the elected officials determined to malign her character. DeVos was an experienced businesswoman who understood the importance of modern IT capabilities. Had Congress not interfered, it is possible that FSA would have been better prepared to connect its data systems to the IRS’s. But Congress did interfere. COVID-19 also played a role in the troubled roll out since IRS workers had not been issued laptop computers, which meant that when they were told to “work from home,” they could not log into their data systems.
The Department faced other challenges in implementing FAFSA simplification because the form is merely the front end of a much more complicated back-end processing system. If FAFSA simplification had simply eliminated questions from the form, I’m fairly certain that the new form could have been rolled out on time and without glitches. But Congress did not just eliminate questions from the form. Instead, it developed an entirely new needs analysis methodology which was not only complicated, but in many ways, nonsensical.
For example, Congress replaced the calculation of the much-hated estimated family contribution (EFC) with an even more opaque eligibility indicator called the Student Aid Index (SAI). Every document, data system and algorithm that included the EFC had to be changed to reflect not just the new nomenclature, but a new way to convert the indicator to a dollar amount of aid eligibility. The new methodology also required the Department to develop different back-end algorithms so it could apply financial penalties to two-parent families. This makes no sense and illustrates the use of the federal student aid system to accomplish political maneuvering.
The new methodology also penalizes unmarried parents who are honest about cohabitating. If parents are married or are unmarried cohabitants, both incomes must be reported on the FAFSA. However, if parents are unmarried and live together but hide their cohabitation, then only one parent’s income is considered for needs analysis. This gives additional preferential treatment to single-parent households. Worse yet, while the new formula omits a non-custodial parent’s income from the needs analysis formula if they are not married to the student’s other parent, should that parent remarry, she must now report her income on her spouse’s child’s FAFSA form. There are lots of other oddities in the methodology that I won’t detail here. Importantly, each of these strange caveats adds complexity to the back-end system and opens the process up to new sources of vulnerability and error. FSA is experienced in creating functional electronic forms, but when they must connect those forms to back-end algorithms that make no sense and discriminate against students just because their parents are married, the challenges grow exponentially.
If Congress really wants to simplify the FAFSA, then it should eliminate all of the loopholes and caveats used to pick winners and losers among American students and parents, and simplify the needs analysis formula.
For all of these reasons, I would suggest that if Congress is looking for someone to blame for the FAFSA simplification debacle, perhaps they should pull out some mirrors. There is no doubt that the flawed FAFSA release made it impossible for some students to select a college and enroll in a timely manner, which is a tragedy for hard-working, motivated and well-prepared students. But to the extent that the failed FAFSA prevented under-prepared and under-motivated students from taking student loans, perhaps this dark cloud has a silver lining. Mostly, I hope that the failed roll-out increases public awareness of the outsized role that the Department of Education now plays as a primary financier of higher education, which gives the Department too many tools to meddle in the business of higher education.
I also hope that this sheds light on the Department’s lack of capacity to fulfill its duties as a national/federal bank. If Congress really wants to simplify the FAFSA, then it should eliminate all of the loopholes and caveats used to pick winners and losers among American students and parents, and simply the needs analysis formula. It should eliminate the marriage penalties that reward people for gaming the system, and it should provide sufficient resources through on-time appropriations bills so that agencies can hire the contractors they need to accomplish Herculean IT upgrades. Congress should consider moving the Federal Student Aid program to the Department of Treasury, where the agency’s internal access to income data and uber-secure IT systems eliminates the highest hurdle to simplification, which comes from the need to connect two agencies dissimilar data systems. Finally, Congress must establish an independent board of bankers and financial experts to hash out the details of the needs analysis methodology so that these decisions can be based on empirical data, economic theory and fiscal responsibility rather the political horse-trading of the legislative process.
Diane Auer Jones spent thirty years as an educator, scientist, administrator, and public policy official. Most recently she served as the acting under secretary of education at the U.S. Department of Education (Donald J. Trump Administration), where she had previously served as a Senate-confirmed assistant secretary for postsecondary education (George W. Bush Administration).