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Financial Aid

The Burden of Verification

Higher costs for colleges, more barriers for students
University Business, Sep 2010

Financial aid professionals have asserted for some time that the federal regulation requiring higher education institutions to verify certain information on some students' aid applications creates additional burdens for low-income students and financial aid offices. These assertions were recently confirmed by a report from The Institute for College Access and Success (TICAS) that chronicles the impact of verification on students and financial aid offices at 13 community colleges in California.

The report was released as the U.S. Department of Education worked to finalize a dramatic overhaul of the verification regulations. While the department's goal is to update and streamline the verification process, many believe its verification proposal will accomplish the opposite by increasing barriers to higher education for low-income students and also increasing administrative costs for institutions.

The verification requirement is designed to catch fraudulent and inaccurate information on the Free Application for Federal Student Aid (FAFSA) to prevent students from receiving aid they are not eligible for. The department has a system to identify error-prone FAFSAs for campus offices to verify. Currently, an institution may cap the number of department-flagged applications it verifies at 30 percent of its federal aid applicant pool. If fewer than 30 percent are flagged, the institution does not need to verify more than the amount flagged. If a school selects applications to verify in addition to those flagged, the institutionally-selected applications do not count toward the 30 percent cap.

Currently, schools must verify five data elements flagged by the department:

  1. Adjusted Gross Income
  2. U.S. taxes paid
  3. Untaxed income (which may include multiple sources)
  4. Household size
  5. Number of family members in college

Students selected for verification must take additional steps before they are determined eligible for aid. They must document specific income and demographic information from their applications.

Once an institution has gathered the required documents from the family and compared them to the application data, it may choose to exercise an allowable tolerance option rather than require reprocessing. The school is liable for any miscalculation it makes in determining the applicability of tolerances.

An institution may also make an interim disbursement to a student, if the institution doesn't have conflicting information about the student before verification is complete. The school is liable if verification is not resolved or if an overpayment resulting from corrected data is not repaid by the student.

The TICAS verification report "After the FAFSA: How Red Tape Can Prevent Eligible Students from Receiving Aid," suggests that additional verification requirements can deter students from completing the aid application process. The report found that only 2 percent of students at

the 13 community colleges who were selected for verification became ineligible for Pell Grants. However, the students who were selected for verification were less likely to receive grants than those who were not selected. On average at these schools, about a third of all aid applicants who appeared eligible for federal Pell Grants did not receive this aid.

Students selected for verification were less likely to receive grants than those not selected.

The report also features interviews with financial aid administrators and a student survey. The interviews and survey illustrate the negative effects the verification process can have on students. "Some students just can't get through the process," said an administrator from one college included in the study.

The study also quantifies the burden on these 13 community colleges. The institutions in the report together spent between $1.7 million and $2.5 million attempting to verify aid applicants in 2007-08 alone. The department is more likely to flag Pell-eligible students for verification, so the administrative burden is greater for community colleges and other institutions that serve a larger portion of low-income students. This puts an additional burden on institutions' already strained budgets and leaves fewer resources for vital services like one-on-one counseling.

The department has proposed and is currently in the process of finalizing new verification regulations that will radically alter the verification process. Final regulatory language is expected to be released in November and the new regulations would be enacted in July 2011.

The department's goals are to bring the verification requirements up to date with recent changes to the Expected Family Contribution formula and the aid application process, and to target verification more finely, relieving the burden on schools and students. The proposed regulations would likely increase the number of FAFSAs that institutions must verify, but reduce the number of data elements that must be verified. This trade-off has many questioning if the department would accomplish its goals with new regulations.

The proposed regulations would:

  • Remove the current 30 percent cap on verification so all applications flagged would need to be verified.
  • Replace the five predefined data elements with a variable selection that corresponds to the most error-prone data elements for a particular student.
  • Allow institutions to accept the electronic importation of data obtained from the IRS into an applicant's online FAFSA in lieu of an income tax return.
  • Require all corrected data to be reprocessed by removing institutions' option to waive reprocessing if recalculating the EFC shows a student's Pell Grant award would not change.
  • Allow institutions to make interim aid disbursements before receiving a corrected Student Aid Report (SAR) or Institutional Student Information Record (ISIR) if changes to application data don't result in changes to the aid award.
  • Require institutions to complete verification prior to making professional judgment adjustments.

After the department published its proposed rules, comments from the higher education community were solicited. The National Association of Student Financial Aid Administrators submitted comments expressing concern about several aspects of the proposed changes.

In its comments, NASFAA expresses support for the department's goals to limit verification to those elements most likely to be in error, but encourages the department to ensure the data elements selected will be reasonably easy for aid applicants and institutions to verify. It is suggested that the department not flag applicants who use the IRS data retrieval process without modifying the data to complete the online FAFSA. NASFAA also expressed concern about the department's proposals to eliminate some verification tolerances and exemptions and require institutions to submit all corrections to the department for processing because this will increase administrative burdens and create unnecessary delays for students.

The author of the TICAS report and the institute's program director, Debbie Cochrane, expressed concern about the department's proposal to eliminate the 30 percent cap and require all applications flagged by the department to be verified. "The proposed rules would drag more low-income students into the verification process and keep some of them from receiving the grants they're eligible for, while putting more pressure on the cash-strapped community colleges that serve them," she says. "We believe there should still be a cap."

Haley Chitty is director of communications at the National Association of Student Financial Aid Administrators,