Implications of Changing FAFSA Deadline and Distribution of Financial Aid Awards

Implications of Changing FAFSA Deadline and Distribution of Financial Aid Awards December 2015 2015 JCR p. 121 MARYLAND HIGHER EDUCATION COMMISSION 6 N. Liberty Street, 10 th Floor, Baltimore, MD 21201 Page 1

EXECUTIVE SUMMARY The Free Application for Federal Student Aid (FAFSA) is the gateway for both federal and State financial aid. Annually, thousands of students across the State of Maryland complete the FAFSA application by the March 1 deadline and are considered for financial aid but a sizeable percentage often miss the deadline. These students are referred to as late FAFSA filers and account for approximately 35% of the total number of students that complete FAFSA applications annually. The 35% that miss the March 1 deadline are not eligible for State financial aid and represent a population of students with the greatest need such as low-income and first generation students. To ensure this population of students as well as all students complete the FAFSA application, the U.S. Department of Education recently passed the prior-prior year (PPY) simplification FAFSA process that will allow students the opportunity to submit the FAFSA using the PPY s tax information in October, three months earlier than was allowed in past years. The State of Maryland also wants to ensure that all Maryland residents are presented with an opportunity to complete the FAFSA application on-time to be considered for State financial aid by extending the March 1 deadline to allow more students time to complete the FAFSA. Extending the State deadline to align closer to the federal deadline will allow certain students such as community college students who historically complete a FAFSA late more time to apply for State aid. However, the idea to extend the State deadline will offset the U.S. Department of Education s overarching goal of early awareness and simplification. Maryland residents will have earlier access to FAFSA information given the PPY initiative, thus nullifying the need to extend the March 1 st deadline. Further, a later deadline will require statutory changes to various scholarships programs as many are sensitive to the March 1 st deadline. The Educational Assistance Grant program in particular will be subject to an increased waitlist of students given its historical funding limitations. As well as restructuring the timeline in which award notices are released to students that successfully meet the State deadline to be considered for state aid. Maryland, in comparison to other states, currently has an early priority/primary deadline but other states with later deadlines may potentially increase their deadlines with the implementation of the PPY simplification process. As detailed in the below analysis it is the recommendation of the Maryland Higher Education Commission (MHEC) in consultation with the University System of Maryland, Morgan State University, St. Mary s College of Maryland, the Maryland Association of Community Colleges, and the Maryland Independent College and University Association; that Maryland does not extend the State deadline beyond March 1 st. 2 P a g e

2015 Joint Chairmen s Report: Implications of Changing FAFSA Deadline and Distribution of Financial Aid Awards (p. 121) December 2015 INTRODUCTION In the 2015 Joint Chairmen s Report, the committees requested: Financial Aid Deadline: March 1 is a State deadline to be eligible for specific scholarships and financial aid programs; the federal deadline for the Free Application for Federal Student Aid (FAFSA) is June 30. It is the intent of the budget committees that the Maryland Higher Education Commission (MHEC), in consultation with the University System of Maryland, Morgan State University, St. Mary s College of Maryland, the Maryland Association of Community Colleges, and the Maryland Independent College and University Association, be responsible for a report which examines the positives and negatives of changing the Maryland deadline for FAFSA submission closer to aligning with the federal deadline of June 30 and examines the award process regarding timing and availability of financial awards. The report is due to the budget committees no later than October 30, 2015. Background The FAFSA is used to determine the amount of money a family is expected to contribute to the price of attending a postsecondary institution. The results of the FAFSA are used in determining the student s eligibility for grants, work-study, and loans. In addition to determining student eligibility for federal aid, it is also used for determining eligibility for State financial assistance. The FAFSA serves as a critical application for the Maryland Educational Excellence Awards (EEA) Programs, which is composed of the Educational Assistance (EA) Grant Program, the Guaranteed Access (GA) Grant Program, and the Campus-Based Educational Assistance Grant (CB-EAG) Program. The FAFSA serves as the application required for the EA Grant Program and must be completed by March 1 of each preceding academic year. There are approximately 200,000 Maryland students who complete the FAFSA each year. Out of that population, approximately 130,000 (or 65%) complete the application by March 1 and the remaining 70,000 (or 35%) file after the deadline. Examining State Deadlines The Maryland deadline serves as a primary/priority deadline that students must meet to be considered for financial assistance. As identified in the chart below, Maryland s priority/primary deadline is early in comparison to other states and U.S. territories. (States and U.S Territories with January deadlines are generally described as priority deadlines with aid awarded until funds have been depleted.) A number of states have rolling applications or dual deadlines for various types of students. 3 P a g e

Table 1. 2015-2016 Filing Deadlines by State and U.S. Territory Month # of States and U.S. Territories with Primary/ Priority Deadline # of States and U.S. Territories with Secondary Deadline January 9 0 February 1 0 March 11 1 April 4 0 May 5 0 June 3 3 July 2 0 August 0 1 September 0 3 October 0 1 Rolling/ 21 Source: National Association of State Student Grant & Aid Programs (NASSGAP) States with later FAFSA deadlines allow for more students to be considered for financial resources. In a recent survey performed by MHEC on various state deadline requirements, the Massachusetts Department of Higher Education (MDHE) confirmed that some of the positive implications of having a primary/priority deadline of May 1, in comparison to March 1, are: It allows a student to be considered for State aid even if they [sic] miss the institution s priority deadline. It also allows community college students an opportunity to receive state aid in the event that the decision to attend college is made later in the process. According to MDHE, a later deadline allows for an expanded pool of applicants and enables consideration of applicants who would otherwise be omitted under an earlier deadline. Although not all community college students that make the last minute decision can be captured under the May 1 date in Massachusetts, a portion of them are. However, MDHE inevitably omits a large group of community college students since the majority of the group do not make a decision to attend until July. While it is evident that the earlier students apply for financial aid, the more access they have to financial aid resources, earlier filing deadlines often prevent many students, for whom the aid would make a significant impact, from receiving aid. Particularly, low-income and first generation students often do not realize that financial aid is available until it is too late. Those same students face significant challenges in completing the FAFSA and often feel intimidated by the process. It was these factors that resulted in President Obama s executive action to allow the use of PPY tax information, allowing the FAFSA application to be available earlier and simplifying the process. 4 P a g e

Implementation of PPY FAFSA Simplification The executive action occurred in September 2015 and allows the use of PPY tax information on the FAFSA. This major change is expected to increase the accuracy of FASFAs and provide families an earlier and more accurate estimate of their anticipated financial aid and college costs. Under PPY, families will be able to use tax information from two years prior to complete the FAFSA application as early as October 1, thereby reducing the pressure on families to file taxes prior to their respective State deadlines. PPY also makes the FAFSA process easier and quicker as it allows families the opportunity to utilize the IRS data retrieval option directly through the FAFSA application when filing online. This decision resulted from several years of discussion on how to simplify the FAFSA process and eliminate the significant number of low-income and first generation students who failed to complete the FAFSA application caused by confusion and delays in filing taxes. According to research provided by the National Association of Student Financial Aid Administrators (NASFAA), low income families experience very little income fluctuation from year to year and most would not see a significant change in their eligibility for a Pell Grant with a switch to PPY income. It is anticipated that PPY will increase the accuracy of student data to those entities responsible for awarding financial aid. With the benefit of completing the FAFSA as early as October 1, MHEC anticipates an increased number of Maryland students eligible for the EEA Program. Under PPY, students will also be able to file a FAFSA as early as October 1, rather than January 1, of every year. While extending the State deadline may allow more applicants to apply for State assistance, PPY has already provided this opportunity by allowing students to complete the FAFSA three months earlier. Implications If the deadline were to be extended, there would be significant impact to the EA program and required statutory changes to the CB-EAG program. A date extension would positively impact the Veterans of the Afghanistan and Iraqi Conflicts (VAIC) Scholarship Program. A later deadline would significantly impact the EA Grant program and the waitlist. Historically, the EA Grant program has increased the number of eligible applicants over the last five fiscal years. At the end of fiscal year 2015, approximately 22,000 eligible applicants were unable to receive EA awards due to lack of funds. A later deadline will increase an already significant waitlist, considering that students who miss the deadline are likely to be first generation and low-income students. Without an increase in funding towards the EEA program, extending the deadline will result in a larger waitlist. In order to ensure minimal impact to the EA Grant program, the State would have to increase funding to the EEA program. Secondly, the CB-EAG Program, which provides financial assistance to students who file the FAFSA after the March 1 deadline date, would require statutory changes if the deadline were extended (as noted in statute). Section 18-307(d)(1)(i) of the Education Article of the Annotated Code of Maryland states, If State funds are available for this purpose, institutions of higher education in the State may provide Delegate Howard P. Rawlings Educational Excellence Awards to students who otherwise meet the requirements for receiving a Delegate Howard P. Rawlings Educational Excellence Award but who apply after the March 1 deadline or have other extenuating circumstances. The CB-EAG is an important option for students who miss the deadline given that many late filers are students who have enrolled in community colleges, since they are open enrollment institutions. Therefore, an important need is being met by the program under the current deadline of March 1. It is important to note that with the implementation of PPY and the opportunity for students to complete the 5 P a g e

FAFSA application three months earlier beginning in 2017-2018, there is the potential for a reduction in the overall number of late FAFSA filers. Moreover, extending the deadline date will benefit the VAIC program. The VAIC program provides financial assistance to U. S. armed forces personnel who served in the Afghanistan or Iraq Conflicts. To be considered for the scholarship, applicants are statutorily required to complete the FAFSA application for federal and State financial aid by March 1 of each year. The VAIC program receives $750,000 in State funds annually and provides scholarships to approximately 170 recipients. Changing the State deadline will require a change in the enabling statute, but the change could benefit those applicants who miss the March 1 deadline. Finally, a later deadline date will place the State at a disadvantage, since such action would align due dates of State and federal programs and defeat the purpose of earlier notification of financial aid resources being provided through PPY. Notification & Awarding Process It is important to note that under the current or proposed extended deadline, there would be no impact on the timing of award notifications to students. MHEC is able to provide timely award notifications since Section 18-107(a)(2) of the Education Article of the Annotated Code of Maryland states, Each year, the Governor shall include in the State budget at least 80 percent of the funds appropriated in the prior fiscal year for need-based programs.... This allows MHEC to process award notifications to students under the current deadline or proposed extend deadline by the spring, based on 80% of the prior year s appropriation. Conclusion Extending the March 1 deadline so that it aligns closer to the federal deadline would give students additional time to complete the FAFSA, thus potentially increasing the number of FAFSAs and State aid applicants. However given the recent implementation of the PPY Initiative, the need to extend the March 1 deadline becomes nullified contextually. Under PPY, students will be afforded three additional months to complete the FAFSA application thus omitting the need to extend the State deadline at this time. Additionally, unless there is an overall increase of funding provided within the EEA program, any extension of the deadline would continue to increase the number of qualified individuals ultimately adding to an already extensive waitlist. Therefore, the MHEC recommends that the State deadline remain the same pending further review and analysis of PPY and its effects on Maryland residents. We recommend allotting a minimum of three years at which time additional PPY data can be acquired to determine its impact on the state. Recommendations Considering the major change to the FAFSA application by the September Executive Action, MHEC recommends that the State deadline not change to align closer to the federal deadline of June 30 until several years of PPY can be assessed. The overarching goal of PPY is to promote early awareness through completion of the FAFSA. The earlier students are able to apply for the FAFSA with a simplified process, the resulting earlier award notification will eliminate the need to extend the State s deadline for late filers. PPY also will help alleviate student apprehension, causing students to wait to file the FAFSA due to tax issues and/or feeling intimidated by the process, the most frequent reasons why students miss the March 1 deadline. 6 P a g e

The State should reevaluate the State deadline after three years (at minimum) of implementation of PPY to determine if extending the deadline would be beneficial to Maryland residents. Data within this three year period should indicate whether allowing more time for students to complete the FAFSA correspondingly increases the likelihood of receiving State financial aid. The State should continue to provide financial assistance to students who miss the March 1 deadline within the CB-EAG program. As there will always be a need for the CB-EAG program under the current deadline even with the implementation of PPY as students will always miss the deadline. The State should consider providing additional funding within the EA program, since extending the deadline will increase the number of eligible applicants within the component GA program and EA Grant program. Given that the GA program is prioritized over the EA program, any extension of the State deadline will result in an increase of eligible GA recipients and impact the aggregate level of funding allocated to the EA program. The State should be aware that extending the deadline without corresponding additional funding would likely expand the waitlist with the implementation of PPY. 7 P a g e

8 P a g e Appendix A: State and U.S. Territory Deadline Dates States Primary Deadlines Secondary Deadlines Alabama Alaska After January 1, 2016 June 30, 2016 (date received) American Samoa Arizona Arkansas June 1, 2016 (date received) California March 2, 2016 (date postmarked) September 2, 2016 (date postmarked) Colorado Connecticut Delaware February 15, 2016 (date received) April 15, 2016 (date received) District of Columbia May 1, 2016 (date completed) June 30, 2016 (date received) Florida Georgia Guam Hawaii Idaho May 15, 2016 (date processed) March1, 2016 (date received) Illinois After January 1, 2016 Indiana Iowa Kansas March 10, 2016 (date received) July 1, 2016 (date received) April 1, 2016 (date received) Kentucky After January 1, 2016 Louisiana July 1, 2016 Maine Maryland Massachusetts Michigan May 1, 2016 (date received) March 1, 2016 (date received) May 1, 2016 (date received) March 1, 2016 (date received) Minnesota 30 days after term starts (date received) Mississippi March 31, 2016 (date received) September 15, 2016 (date received) Missouri Montana Nebraska April 1, 2016 (date received) March 1, 2016 (date received) Nevada After January 1, 2016 New Hampshire New Jersey June 1, 2016 (date received) October 1, 2016 (date received) New Mexico New York June 30, 2017 (date received) North Carolina After January 1, 2016 North Dakota Northern Mariana Islands April 15, 2016 (date received)

Ohio Oklahoma March 1, 2016 (date received) Oregon After January 1, 2016 March 1, 2016 Pennsylvania May 1, 2016 (date received) August 1, 2016 (Only for certain initial applicants) Puerto Rico Rhode Island South Carolina After January 1, 2016 June 30, 2016 (date received) South Dakota Tennessee March 1, 2016 (date received) September 1, 2016 (date received) Texas March 15, 2017 U.S. Virgin Islands Utah Vermont After January 1, 2016 Virginia Washington After January 1, 2016 West Virginia March 1, 2016 Wisconsin Wyoming 9 P a g e

Appendix B: State Deadline Survey Results State Deadline Details from Selected State Agencies Question Illinois Indiana Massachusetts Minnesota Kansas 1 Has your state considered changing its deadline date? If so, why? 2 Does your state have a deadline date? Yes/No If, no why not? 3 What are some of the positive implications as it pertains to your State s deadline date? Our FAFSA deadline date is irrelevant, because our deadline language reads: As soon as possible after January 1, 2016. Awards are made until funds are depleted. No. We used to have a deadline, where students could apply until September. However, we have found that we run out of money in March now. The deadline encourages people to apply in a timely fashion. Yes, our deadline is March 10 th. No, our deadline has been May 1st for over 30 years. Yes, our deadline is May 1st. It allows a student to be considered for State aid even if they miss the institution's priority deadline. It also allows community college students an opportunity to receive state aid in the event that the decision to attend college is made later in the process. Minnesota used to use the FAFSA deadline of June 30th at the end of the aid year for its State Grant program. Within the last decade, the Legislature changed the deadline to the 30th day of the term, such that students would qualify for an award for a term if their annual application was received before the 30th day of the term. Yes The deadline was supposed to help colleges package Student Grants earlier in the year so we could better project spending for the year. In reality, that hasn't happened, since the deadline relates only to the original application and not to follow-up documentation and the awarding process, which can still be done throughout the year. Yes, we are considering changing our state application deadline because of the move to PPY. It seems that we would be completely out of step with the colleges and universities in our state if we did not. We have a priority deadline of May 1 st for our state programs with a FAFSA application priority deadline of April 1 st. Positive implications of our state deadline are to encourage people to file their FAFSA prior to our priority state application deadline so that their information will be received in a timely fashion to award aid 10

4 Can your provide a brief overview regarding timing of your State s awarding process and the availability of financial awards with a later deadline date in comparison to MD (March 1st deadline date) 5 What are some of the negative implications with your State s deadline date? Our state is first come, first serve. We take all the applications starting January 1, line the up by need, and award until we run out of money. I don't know. Maybe make people feel there isn't any money-but there isn't. Uses a March 10th deadline and May 15th deadline for any needed revisions. Considers both deadlines as hard deadlines, meaning if a student does not meet the deadlines they are denied access to financial aid that year. Employs a grid structure for financial aid incentives, which are adjusted based on the budget. A majority of awards are made at the maximum amount. All students who meet the established deadline are guaranteed an award if all other criteria is met. This sometimes results in an across the board reduction of awards for the academic year. Also, even though the deadline is late, many community college students make the decision to attend college well after the state financial aid deadline and are not eligible for aid. State Grants are packaged by the participating campuses in MN. Financial aid award notices typically go out in early spring for private colleges and freshman at four-year public colleges. The two-year public colleges normally don t send award notices until May or June. Minnesota doesn t normally have issues with funding shortages in our State Grant program. It hurts the students we are trying to help the most first generation and non-traditional students who make their decisions to attend college at the start of the school year. Knowing the amount of our state appropriations to fund our student aid programs. Typically our state s legislative session will not end until mid- May. During this past session, it was mid- June. Our FAFSA deadline (4/1) and state application deadline (5/1) are already pretty late in the process so it hasn t been too much of any issue but this could be something that could potentially be an issue if there was a greater period of time between the deadline and when our state budget is determined. The current deadline is late. We would have some difficulty moving a deadline up much before February 15/March 1 because one of our programs is a scholarship that is determined based on a 7 th semester high school transcript and completion of a set curriculum. 11

6 Approximately how many students meet the State s deadline date on an annual basis? 7 For your needbased program(s) how many recipients do you award annually? 8 Do you have a separate State Deadline date for that initial and renewal applicants must meet annually? 347,624 applications with eligibility. We made 128,399 awards for 2014-2015. The March 10th is the initial deadline and a May 15th deadline to submit any revision to the initial application. 225,000 or more Over 95% of applicants meet the application deadline each year. We had roughly 53,000 for the Commonwealth's primary grant program. Other needbased programs awarded directly by colleges resulted in awards to an additional 47,000 students annually. May 1st is the annual deadline for all students. For the most recent completed aid year, it was just over 95,000. No. The same deadline is used for all applicants. Generally about 80%. Approximately 12,000 New and renewal applicants have the same deadline. 12