Congress made a mess out of FAFSA — now it needs to fix it 

Imagine discovering, halfway through your child’s college education, that you’re suddenly expected to pay thousands of dollars more in tuition, despite no change in your financial standing or increase in your student’s tuition.  

Parents around the country will experience precisely this sticker shock unless Congress acts quickly to undo the mess it created with the new Free Application for Federal Student Aid (FAFSA). 

As students enjoyed time at home for winter break, families sat down for the yearly ordeal of completing their FAFSA, and many will see this year’s form — during those brief instances that the site is operational — spit out a wildly inflated number versus past years. The FAFSA that families completed for almost four decades, though cumbersome, was largely effective at establishing a family’s ability to contribute to their children’s higher education. The revised form appears designed as a stealth wealth redistribution tool that punishes middle-class families and enables dubious behavior.   

Under the laudable banner of bureaucratic simplification, Congress set out to remake the FAFSA in 2021. The new FAFSA is shorter, reducing the number of questions families are asked by more than half, but deliberately disadvantages intact middle-class families. Some extremely needy students may have easier access to aid, and most FAFSA filers will save a few minutes, but many families will be on the hook for thousands in increased contributions.  

Much of the “efficiency” of the new FAFSA stems from requiring students and their parents to consent to the transfer of IRS data into the form. Families who withhold consent may be denied aid. Beyond forcing families to consent to this data transfer, the new FAFSA overstates what many families can contribute to their children’s college fund.  

While the old FAFSA excluded primary residences, small businesses and family farms from asset calculations, the new FAFSA treats these assets in much the way that it treats cash in a checking account. A family who resides in a multimillion-dollar mansion would not see a change in their contribution, but a family who farms a parcel down the road from their house, or who operates a plumbing business, would suddenly see their “asset” calculation skyrocket. By including these clearly illiquid assets of persons with modest incomes, Congress has effectively sanctioned a redistribution of wealth from the working middle class to the very poor.   

An interesting linguistic change occurs in the new FAFSA, with the number at the end of the process enjoying a rebrand from “expected family contribution” (EFC) to a “student aid index” (SAI). While the old FAFSA hardly excelled at fostering family formation, the new FAFSA penalizes remarriage by adding consideration of many stepparents’ income and encourages absentee parents by rewarding families with more aid if the wealthier parent is, purportedly, providing less than half of a student’s support.  

Perhaps most damaging for intact families is the change in consideration of multiple students in a single family. While the old FAFSA sensibly divided a family’s contribution among all students enrolled in college, the new FAFSA spits out the SAI per student. A family with three children in school might have had an EFC of $18,000, or $6,000 per student; the same family might now see an SAI of $18,000 per student and be expected to cough up $54,000 per year.  

While the old FAFSA excluded those convicted of certain drug offenses or who were dodging selective-service registration from aid, the new form has removed these exclusions. Similarly, while the old system required students to begin paying interest on subsidized loans if they failed to complete a degree within 150 percent of its standard timeline, students can now meander through their coursework, enjoying taxpayer subsidies for their debt indefinitely. And, while the entire overhaul was premised on shortening and simplifying filing, a new section of questions has now been added to the form to determine an applicant’s race. This in the same year that the Supreme Court found the consideration of race in college admissions to be unconstitutional.  

America’s student aid regime has long undermined personal thrift, college saving and cost-efficient program selection; the new FAFSA appears to be designed even more explicitly to settle political scores and kneecap working families. Congress has much to do to fix higher education funding, but it should start by heading off the impending disaster of the new FAFSA. 

Tim Rosenberger is a legal fellow at the Manhattan Institute.