Working Paper: NBER ID: w18707
Authors: Susan Dynarski; Judith Scott-Clayton; Mark Wiederspan
Abstract: The application for federal student aid is longer than the tax returns filled out by the majority of US households. Research suggests that complexity in the aid process undermines its effectiveness in inducing more students into college. In 2008, an article in this journal showed that most of the data items in the aid application did not affect the distribution of aid, and that the much shorter set of variables available in IRS data could be used to closely replicate the existing distribution of aid. This added momentum to a period of discussion and activity around simplification in Congress and the US Department of Education. In this article, we provide a five-year retrospective of what's changed in the aid application process, what hasn't, and the possibilities for future reform. While there has been some streamlining in the process of applying for aid, it has fallen far short of its goals. Two dozen questions were removed from the aid application and a dozen added, reducing the number of questions from 127 to 116. Funding for college has also been complicated by the growth of a parallel system for aid: the tax system. A massive expansion in federal tax incentives for college, in particular the American Opportunity Tax Credit, has led to millions of households completing paperwork for both the IRS and the US Department of Education in order to qualify for college funding.
Keywords: tax incentives; college aid; financial aid; student enrollment
JEL Codes: I22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| traditional forms of student aid (I22) | college attendance (I23) |
| recent expansions in tax credits for education (H52) | access to funding (O16) |
| complexity of the federal student aid application process (I28) | college enrollment rates (I23) |
| simplified aid application (F35) | college attendance (I23) |