Why Colleges Should Require All Applicants to Fill out the FAFSA

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Postsecondary educational attainment in America is lagging behind many other countries, and with the predicted demand for skilled labor in the 21st century economy, Americans will be at a competitive disadvantage. Federal and state financial incentives, such as making community college free or reimbursing colleges and employers for the cost of apprenticeships and internships, can be aimed at making sure students gain skills in a variety of ways. At the same time, the country needs to focus on getting more of the population to and through four-year college. Despite reports of overeducated baristas, all the evidence supports the economic returns from attaining a bachelor’s degree.

Data confirms that high school students who complete the Free Application for Federal Student Aid (FAFSA) are more likely to attend college than those who do not. This, of course, is the whole purpose of the federal financial aid program — to help lower- and middle-income students pursue higher education.

Despite the recent unfortunate — to put it mildly — rollout of the simplified FAFSA, the country would still be better off if all high school students completed the form. But even before the current fiasco, data on the number of high schoolers filing the FAFSA was worrying. Access to federal aid is contingent on the FAFSA, and if students do not fill it out, they cannot access a major source of financial support for college.

Several states have moved in the right direction in requiring completion. One of the first, Louisiana, saw a 20% increase in FAFSA completions in one year after requiring high school seniors to complete the form to graduate. But the state is rolling back its universal FAFSA mandate over concerns about sharing financial information with the federal government, “invading” families’ privacy and jeopardizing their “liberty.” 

Worries about privacy seem misguided, as families share financial information with the government every year by filing tax returns, and much of the data in the FAFSA comes directly from these. Dropping a statewide mandate will not only hurt those students and families who might not learn about available financial aid; if fewer students go on to postsecondary education, it will make it more difficult for states to meet their higher education attainment goals.  This, in turn, will jeopardize the economic benefits to the state that accrue from having a more educated workforce.  

Hopefully, more states will require high school graduates to fill out the form. But beyond hoping, there is a way to make sure this happens: All colleges and universities could require the FAFSA as part of their application for admissions, whether students are applying for financial aid or not. 

This would create much stronger incentives for more states to mandate that high schools take on the responsibility of mandating FAFSA for their graduates. Even students who don’t require need-based financial aid receive large subsidies from both public and private nonprofit colleges and universities, because the full sticker price does not cover the actual cost of the education received. The difference can be quite large — in many cases greater than the value of a Pell Grant — both at public flagships and more selective private schools. The more selective the university, the larger the subsidies, since selectivity is closely related to the resources that colleges have available to spend on students. These are covered in a variety of ways that are supported by federal and state policies: direct government subsidies to colleges and universities; contributions from donors who receive tax benefits; exemptions from income tax on earnings on endowments; and local property taxes. 

If the FAFSA became a routine part of the college application process for all, it would level the playing field for all students in terms of required submissions and make it more likely that more high school students would receive the financial aid they need. Families that pay full freight might object, but the checks they write don’t cover the full cost of their children’s education any more than the small contributions asked of students who receive large scholarships. Why should the wealthiest families be treated differently than those applying for Pell Grants? Both are receiving public financial benefits, just in different forms. The burden on these families would be minimal since most of the information would come directly from the IRS.

Requiring the FAFSA from all applicants would also offer more information to policymakers on the income distribution of students attending college. Since both the federal and state governments heavily subsidize higher education, understanding how those subsidies are distributed across the population is important for making good public policy. These subsidies are, in part, justified on the basis of supporting economic and social mobility. Without knowing who is receiving them, it is impossible to evaluate their effectiveness.  

Having all families fill out the FAFSA whether they are applying for need-based financial aid or not would make possible better federal and state policies in support of the country’s higher education goals.

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