Simplifying financial aid

It’s no secret that the rising cost of higher education is a significant barrier to attending–and completing–college for many students from low- to moderate-income families. But less discussed is the mountain of bureaucratic paperwork that only makes it harder, writes Susan Dynarski in the New York Times. Her solution? Get rid of the “widely despised form known as the Fafsa (which stands for Free Application for Federal Student Aid)” completely:

The Fafsa is required of all students seeking federal aid, but the information needed to calculate eligibility for that aid is already collected by the I.R.S. In a simplified aid system, tax filers could just check a box on the 1040 to learn immediately about eligibility for federal grants, loans and tax credits.

An alternative idea, floated by Senators Lamar Alexander and Michael Bennett, is to trim the Fafsa down to just two questions. But if the goal is to help more low-income and first generation students go to college, Dynarski says, eliminating the Fafsa makes the most sense. Wealthier families already use their tax forms to get student aid, so why not low-income families too?

How much effort is there, after all, in answering two questions? But a large body of evidence from economics and psychology shows that even minor bureaucratic hurdles can keep people from making smart investments in their futures. … Eliminating the Fafsa and relying on tax data to calculate aid eligibility is the clearest route to permanent simplification…We have a precedent for using tax data to calculate college aid. Eligibility for college tax credits, including the federal American Opportunity Tax Credit, is calculated solely from tax data. These credits go to families with incomes as high as $180,000. Why do these high-income families qualify for aid by simply filing their taxes, while low-income families must fill out the Fafsa to qualify for a Pell Grant? We have created an aid system that is most complicated for the low-income families who are its target.

TOPS shortfall spooks higher ed

Higher education leaders and students got some bad news last week: The state budget is $20 million short of what is needed to fund TOPS scholarships, barely three months after a legislative session that included revenue-raising measures to save higher education from devastating cuts. As the LSU Reveille reports, president F. King Alexander suggested reforms are needed to preserve TOPS and maintain funding for colleges and universities:  

Alexander said the 13 other states who have programs similar to TOPS have got themselves in a “bind,” and Louisiana faces the decision to put higher education funds into TOPS to keep it afloat or into colleges to keep their costs down. “It’s a vicious cycle, really, that we’re caught up in,” Alexander said.. if scholarships wipe out state funding for institutions, they become irrelevant. “A scholarship to nowhere doesn’t get you anything,” Alexander said. The state appropriation for TOPS is about $265 million this year, while the program’s costs will come close to $285 million.

Fracking boom largely avoided state taxes

Just one severance tax break for horizontal gas wells cost the state more than $1.1 billion in lost revenue between 2010 and 2014, according to a new report from the Legislative Auditor:

The report looked at the severance tax suspension that was granted in 1994 to provide an incentive for drilling horizontal wells. According to the statute, the severance tax is suspended for up to 24 months or until the payout of the well is achieved. “Because horizontal wells produce the most oil or gas in the first two years, Louisiana is forfeiting substantial revenue during the most productive period of a well’s life,” the report said. Approximately 98% of the revenue loss from fiscal years 2010 through 2014 was from horizontal wells drilled for natural gas, most of which are located in the Haynesville Shale in northwest Louisiana. According to the Louisiana Department of Natural Resources, all of the Haynesville Shale horizontal wells’ best production is in the first two years. Because production drops significantly after the first two years, some operators may never pay severance taxes.

Legislators should look to reform oil and gas tax breaks as they examine Louisiana’s tax code, with the goal of striking a balance between supporting drillers and protecting taxpayers. The auditor noted that in recent years some states, like Oklahoma, have eliminated exemptions on horizontal wells, while other states like Texas have a temporary, reduced rate instead of a full exemption.

Dustup over New Orleans school changes

A critical opinion piece by Andrea Gabor in the New York Times over the weekend drew a same-day rebuke from education Superintendent John White. Perhaps the most serious allegation raised by Gabor is that charter schools in New Orleans were weeding-out the most disadvantaged students:

A recent report by the Education Research Alliance confirmed that principals engage in widespread “creaming” — selecting, or counseling out, students based on their expected performance on standardized tests. In a forthcoming study, the alliance expects to show that lowest-scoring students are less likely to move to higher-performing schools.

White counters that there are safeguards in place to prevent such practices:

OneApp allows the government to guarantee an open enrollment system, limiting opaque admissions policies that may bias against some children. That same commitment to fairness is reflected in a centralized expulsion and transfer process, requiring school district approval anytime a student exits a school. Since adopting this central process, New Orleans schools have decreased expulsions every year and now expel students at a rate that is below the state average.

Number of the Day
$1.1 billion – Revenue lost from 2010 through 2014 because of the horizontal wells or “fracking” exemption (Source: Legislative Auditor)