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First look opinions on the 2009-2010 FAFSA form

August 2nd, 2008

I’ve been reviewing the 2009-2010 FAFSA form this weekend, in its draft form, to go over the changes since last year’s form. There’s a hefty pile of changes, and while most of them are good, a few contain the potential for some serious abuse.

Here’s a rundown of what’s changed/changing, and my opinion of the changes:

1. The definition of independent student has changed and broadened considerably. Foster kids are included now, as are emancipated minors, children under legal guardianship, homeless kids without parents, and kids at risk of homelessness.

For the most part, these changes have been long, long overdue. Having a homeless kid with no parents rejected for federal aid by default because they can’t provide any parental documentation is the height of stupidity, and it’s good to see this change.

The one change that I think has the most potential for abuse is the emancipated minor clause. The specific text on the draft FAFSA says:

56. As of today, are you an emancipated minor as determined by a court in your state of legal residence?

Gaining emancipated minor status involves petitioning a court, gaining parental consent, and being able to demonstrate that someone under the age of 18 can be financially self-sufficient. Being declared an emancipated minor would mean no longer having to provide parental financial information on the FAFSA and qualifying for additional federal aid.

The potential here for abuse, at least at first read, is high. A family with significant financial and legal access could get a child declared an emancipated minor relatively easily, and that would potentially qualify the child for a lot more aid than they actually deserve.

That’s not to say that emancipated minors don’t deserve recognition - quite the contrary. Children who have been legally emancipated to escape situations such as abuse or domestic violence deserve as much support as possible. I just hope that verification procedures by colleges and the Department of Education are strengthened to prevent abuse of this specific clause. If you’re a financial aid administrator, I’d love to hear how you will ensure that the spirit of the law and the letter of the law remain aligned.

2. The TEACH grant is on the paper FAFSA.

3. 529 plans are now reported as parental investments in question 92. This means they are assessed as parental assets at the much lower parental rate rather than the student rate, potentially making a student more eligible for aid.

4. Eligibility for the Simplified Needs Test and Auto-Zero EFC have been expanded to include a new category - dislocated worker. Here’s what the documentation says that means:

In general, a person is considered a dislocated worker if they meet one of the following conditions:

+ They have lost their job.
+ They have been laid off or received a lay-off notice from their job.
+ They are receiving unemployment benefits due to being laid off or losing a job and are unlikely to return to a previous occupation.
+ They are self-employed but are unemployed due to economic conditions or natural disaster.
+ They are receiving unemployment benefits; however, they may not be considered a dislocated worker if they have quit their job and are receiving unemployment benefits.
+ They are a displaced homemaker. A displaced homemaker is generally a person who previously provided unpaid services to the family (e.g., a stay-at-home mom or dad), is no longer supported by the husband or wife, is unemployed or underemployed, and is having trouble finding or upgrading employment.
+ If a person quits work, generally they are not considered a dislocated worker even if, for example, the person is receiving unemployment benefits.

What this means is that if you as an independent student, or your parents if you’re a dependent student, are laid off, fired, or unemployed for any other reason than “take this job and shove it”, you may be able to get either an automatic zero EFC (no expected family contribution towards paying for college), depending on your income. For the poorest families in the country, this is good news, as it will significantly reduce the burden for poor families to qualify for aid and not have to go through a lot of paperwork.

There are a couple of potential loopholes for abuse here, so again, I hope that financial aid offices strengthen the rigor of verification if dislocated worker status is claimed.

5. The worksheets are gone! This is huge, as it makes one of the most confusing, poorly laid out parts of the FAFSA a lot easier. Worksheet A is gone entirely, and the contents of worksheet B and C have been integrated into the main FAFSA itself, which means that while it will take longer to fill out the actual FAFSA, you won’t be wondering how the numbers from a worksheet transfer onto a FAFSA and the inherent confusion - and lost aid eligibility - will be reduced somewhat.

I’m happy to see the worksheets go. They were really poorly designed.

6. Students who can’t provide parental data will still be able to file a FAFSA using the FAFSA on the Web service. This is huge. Big, huge, and great, because previously, if you didn’t have parental data or ready access to it, the Web app bounced you, and after a couple of times, chances are you never came back - and you lost eligibility for aid. Now your application will be accepted by the Department of Education, so you won’t be REQUIRED to fill out a paper one instead. You may still not qualify for aid, but at least you won’t have to use the paper version.

7. The Department of Education will email you if you have an incomplete application and remind you twice, a week and two weeks after you start your application, that you should come back and finish it.

This is generally a good thing, but I do worry about the high potential of abuse by FAFSA preparation companies and identity thieves that the Department’s email reminders will be too easily copied. One of the things the College Goal Sunday campaigns around the country should include is a briefing for students and families about identity theft and how less than honest folks in the financial aid industry might try to take advantage of this.

Overall, I think a lot of the changes on the 2009-2010 FAFSA, as written now (and obviously subject to change) are good. They have the potential to increase access and opportunity, and with rigorous verification and appropriate awareness, I think the weaknesses of the new FAFSA can be mitigated. I would expect some of the snake oil financial aid salesmen to come out of the woodwork with the usual hyperbole about insider secrets and tricks that only they know, and include some of the loopholes I’ve mentioned here, so be forewarned that they’ve got nothing for sale at thousands of dollars out of your pocket that you didn’t get here for free on the Financial Aid Podcast.

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