Over a Quarter-Million FAFSA Filers Added With Prior-Prior Year Tax Data Change

January 9, 2019

By Carrie Warick, Director of Policy and Advocacy

After a five-year decline in the number of FAFSAs filed by students across the U.S., the 2017-18 cycle saw a 1.2 percent increase in applications filed. That equates to over 228,000 additional FAFSAs filed during a year when the economy remained strong.

One factor fueling this increase is that the 2017-18 award year marked the first time filers used prior-prior year tax information (meaning taxes from a year earlier that were already field) on the FAFSA form. The change also meant that FAFSA filers no longer had to scramble to complete their income taxes, as in past years, and gave the U.S. Department of Education the flexibility to offer the FAFSA form three months earlier: on Oct. 1 rather than Jan. 1.

NCAN calculations based on the FAFSA Data by Demographic Characteristics, Cycles 2008-09 through 2017-18 reports available at https://studentaid.ed.gov/sa/about/data-center/student/application-volume/fafsa-school-state. Accessed 2 January 2019.

In a newly released, comprehensive report on the demographics of FAFSA filers from the 2017-18 filing cycle, the Department provides the first year of data since these substantial changes to the FAFSA filing process took effect. The switch to using older tax information and starting FAFSA filing earlier was made so that more potential students would consider higher education, to give those students more time to explore their options, to increase the number of low-income students applying for college, and to make the overall process easier.

The changes did increase the number of filers, as stated above, and also boosted the number of students completing their aid application earlier in the filing cycle. The first part of the FAFSA cycle, Oct. 1, 2016 through June 30, 2017, saw an increase in filing of 6 percent, which demonstrates that more people filed earlier in the cycle, given that the overall increase was a lower 1.2 percent.

This increase is also noteworthy because it happened during a year with a strong economy, illustrated by the average unemployment rate over time, as shown below. Unemployment continued its several-year trend downward, yet FAFSA filing increased. Usually when there is a strong economy, FAFSA filing decreases. When the economy is weak, more adults return to school and more students who would have attended higher education regardless are in need of financial assistance.

NCAN calculations based on the Labor Force Statistics from the Current Population Survey available from the Bureau of Labor Statistics at https://data.bls.gov/timeseries/lns14000000. Accessed 2 January 2019. (Note 2018 average is based on months January though November).

Two other important goals of the change to using prior-prior year tax information and providing a longer window to complete the FAFSA were to 1) encourage more low-income students to file the FAFSA and 2) encourage all students to apply to additional institutions in order to weigh their options.

One measure of particular interest to NCAN and its members is the number of Pell-eligible students who file the FAFSA each year. This percentage fluctuates over time, which is apparent below, as the percentage of Pell-eligible students increased during the Great Recession. This happened for several reasons: Going to school is more attractive when jobs are less plentiful, students who would have attended college anyway became Pell-eligible due to changes in their or their parents’ employment status, and Congress expanded Pell eligibility during this time.

However, post-Recession, Pell-eligible filers as a percentage of all FAFSA filers has dropped continually. The PPY change reversed that trend, with an increase of .3 percent, or over 58,500 additional Pell-eligible FAFSA filers during the 2017-18 cycle.

In terms of schools applied to, many NCAN members recommend that students consider at least four schools so as to have a variety of financial aid package options. The percentage of students considering more than one institution has also increased over time, including a jump of 5 percentage points from the year before PPY to the year after. For the 2017-18 cycle, 38.8 percent of freshman students filing a FAFSA for the first time sent their financial information to more than one institution, up from only 33.8 percent the year before.

Using prior-prior year tax data should make filing the FAFSA easier. If a student’s tax forms are already complete the day the FAFSA becomes available, more individuals can use the Internal Revenue Service Data Retrieval Tool (IRS DRT) to transfer their financial information to their FAFSA. Using the IRS DRT also makes it less likely that a student will be selected for verification, the audit-like process of proving that information included on a FAFSA is accurate.

Unfortunately, in March 2017, during the peak of FAFSA filing season, the IRS had to remove the Data Retrieval Tool from the FAFSA due to a security breach. This ultimately caused the number of FAFSA filers using the DRT during that cycle to plummet, making it more difficult to measure the impact of these changes. Similarly, average FAFSA completion times did not change dramatically from the year before, most likely because  the DRT is one of the key avenues to decreasing the time it takes to complete the form.

As the 2018-19 FAFSA award-year cycle comes to a close in June, NCAN looks forward to learning if these completion trends continue and whether DRT usage increases (and, in turn, time to completion decreases). However, those data won’t be available until December. And for the FAFSA cycles for which current high school seniors are applying? Those data will come to us in December 2021.

NCAN thanks the Department for its transparency in this data and encourages the Department to release the demographic review of FAFSA filers at intermittent points throughout the FAFSA filing cycle, not only at the end.

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