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November 19, 2013 11:00 AM Should We Just Start Over on Federal Financial Aid?

By Daniel Luzer

According to a recent article in the Chronicle of Higher Education, some senators are considering if it might be a good idea to just scrap the whole system of Pell grants and subsidized federal student loans, and just start all over again.

As the piece puts it:

Congress should scrap the Free Application for Federal Student Aid, streamline the current patchwork of programs, and provide students with earlier estimates of their eligibility for aid, witnesses told the Senate education committee on Tuesday.
The witness panel, which consisted of two researchers, an advocate for low-income students, and a consultant, offered varied prescriptions for fixing the student-aid system. But they agreed that the Fafsa, the form the government uses to assess financial need, remains too complex, and that prospective students would benefit from earlier aid estimates. They also coalesced around the idea of replacing the current patchwork of programs with a single grant, loan, and tax credit.

Critics have long recognized that the existing system, particular the Federal Application for Student Aid (FAFSA) form, is far too complex and fails to provide students with enough money.

As the article put it, “witnesses also expressed support for standardizing financial-aid award letters and restoring the year-round Pell Grant. They called for providing students with more data on colleges’ student outcomes, to better guide their college-going decisions.”

But Democratic Iowa Senator Tom Harkin, long a champion of progressive higher education policy, was unsupportive. Providing students with “more information” would run the risk of “overloading students with so much information that they’ll just be confused.” He also pointed out that Congress eliminated year-round Pell with the Congressional Budget Office found that the program simply wasn’t cost effective.

This is one of the fundamental problems with attempts to reform federal grant and aid programs. Americans have been aware of the flaws of FAFSA for more than a decade, and policy makers have been able to make only minor changes.

Furthermore, the real, structural problem with federal money for education, and the reason it’s so ineffective at ensuing college completion, is that there simply isn’t enough of it to perform the functions for which the policies were originally created.

In the 1970s the maximum Pell Grant once covered the entire cost of a community college, and almost 80s percent of the cost of a public university, today it makes up only about 60 percent of the cost of a community college and about 35 percent of a public 4-year college.

Subsidized loans were supposed to guarantee that students who lacked the full funds for college could still pay for it without going into unmanageable debt. Federal loans no longer ensure that.

This is the real problem. Making the forms easier to fill out (while a helpful change, for sure) won’t address that structural difficulty.

Maybe we should scrap the system, but can we? Can we fix it so it actually works?

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer

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