FAFSA change creates headaches for college families

In our last report on why American colleges are so expensive, we focused on the costs, the financial aid process, and the role of accreditation in deciding how students receive both needs based and merit aids. But, now there are changes to the Free Application for Federal Student Aid (FAFSA) form, the fee-less form that opens the door to federally financial aid, and in some instances school, or state based aid.

For many years parents with multiple children enrolled in college, at the same time, received a discount making it more affordable for parents.

That has all changed and in a 2020 proposal from Sens. Lamar Alexander of Tennessee and Patty Murray of Washington State, the discount has been eliminated, in an effort to equalize access to aid for lower income families, especially those whose income is $100,000, or below to increase access to Pell Grants.

This is a form of academic outreach to those students, and their families, and the goal is to increase access to higher education for those who need it most. And, to note, Brandeis is using the new form to enhance that population and is using the version only for returning students whose gross family income is less than $100,000 according to Sherri Avery,  vice president of student financial services in a conversation with USA News.

Approximately 13 million college bound students complete the form, and some state that the changes to the FAFSA were designed to simplify the form both visually, and with content to match other formats; and in fact the number of questions were reduced from 108 to 36.

“It also uses a new formula for determining the “Expected Family Contribution” (EFC) — which will be renamed the “Student Aid Index” (SAI). The new FAFSA will still request information on the number of children in your household, but the SAI will no longer provide a discount for multiple children in college at the same time,” according to Mass Mutual’s blog.

“We also used to suggest to families with kids who are two years apart in school that the oldest child consider a gap year, so they can at least divide their EFC for those three years when their kids would be in college at the same time,” said Brock Jolly, a financial professional with The College Funding Coach in Vienna, Virginia. “These strategies will no longer work.”

The previous version had an equal division by the number of children enrolled concurrently.at college. 

Now, using a hypothetical calculation of a family income of $50,000 a first child would qualify for $8,000 with an EFC of $42,000 per year, but with the second child starting the following year, the EFC will be divided between the two children of $21,000 each, and then a third child would be calculated on a 33 percent basis. And, further for the hypothetical fourth child, based on school costs and rankings.

The winners are those aforementioned low income families, and the losers are the middle income and higher families.

While the high income families won’t get much they may get access to being able to simply write a check for annual tuition costs; and, Jolly noted to the blog that, “There are colleges out there that will make admissions decisions based upon your ability to pay full fare,so if school X looks at your FAFSA and sees that your family’s EFC (soon-to-be SAI) is six figures or more, they may be more likely to accept that student over another candidate who would need financial aid. A full-pay family may have a small leg up.”

The lower income families may get more in traditional forms of aid such as work-study, and loans with possible low interest rates.

This new reality means that spreadsheets used to calculate estimated costs will be revised, but let’s also remember that parents don’t know what aid their children could get since that is not given till acceptance, and as we’ve noted schools can afford to be stingy, especially with in-state calculations for state based schools, where parents lack the competitive edge, with lowered tuition versus students from out of state paying more.

Often overlooked, especially for those students desiring entrance to posh schools such as Harvard, Princeton, or Dartmouth is that these schools are well endowed, and can offer more, especially to low income students, especially with merit aid.

For some the drill down on college applications for their high school seniors not only took a U turn with the changes of the FAFSA sibling discount, there is another option and that is to complete the College Scholarship Service (CSS) Profile, and while the detailed questions might be intimidating, the sibling discount is available.

In its original converge, The New York Times quoted “Sandy Baum, a nonresident senior fellow at the Urban Institute, said she understood the financial strain that families might feel when multiple children were in college. But given that college costs are now paid by saving and borrowing over a decade or more, she said, it doesn’t make sense to give, essentially, a bonus to families just because they have two children attending college simultaneously.

“There’s no reason why a family with twins should get more money,” she said. “It’s not fair to families with different spacing” of children.”

The National Association of Student Financial Aid Administrators has noted “Eliminating the sibling bump also makes it possible to create a simple chart that families can check to see if they qualify for Pell grants, according to a statement from the association. Factoring in the number of students in college would have made it “unworkable.”

US Jobs report for September kept on growing

If there is too much of a good thing,then the September Jobs Report released by the US Labor Dept on Friday, then that news of 263,000 nonfarm payrolls gave the Federal Reserve enough of the jitters to wonder how much more that can be done to lessen the hiring, and by turn, the still high wages that desperate employers are using to lure the best talent that is needed to attract them, and enough to frustrate the Feds as they struggle to meet their twinned mandate of full employment and 2 percent inflation.

There is so much resilience in the American economy, and that has recovered nearly all of the jobs lost to the Covid pandemic, yet there are still employers that need workers, even after lessening educational requirements, forgiving prior marijuana convictions, but still the need for more employers.

Women are still underrepresented and child care workers are one group that have lost employees, and the consequence is that many women are staying at home to take care of their children. Labor Force participation, overall, has stayed relatively the same, and 62.3 percent, a notch higher than in August.

While some have definitely decided to reevaluate their skill set and move away from prior jobs, but for many men, largely unaffected by child care are holding back, a conundrum for the Reserve, who is expected as The New York TImes stated, another “jumbo sized” rate increase, with bets of another 0.75 percent. And, while time will tell, the economy is like a watched pot that never boils.

The unemployment rate has inched down to 3.7 percent from 3.5 making it robust and also resilient, which equals a fifty year low; but, the elephant in the room is still inflation that has nibbled away at wage increases, as the public struggles to deal with high rents, and food prices, some even seeing double dollar increases on such prosaic groceries, such a doughnuts, not to mention the more protein based options such as meat.

Those wages up by 5 percent on an annual basis, and monthly by 0.3 percent, are not keeping up with inflation is a huge problem for consumers even as they have moved away from consumer products to services.

Fed governor Phillip T. Jeffries told the Times that he felt that “upward wage pressures in the future” can be problematic. But, some areas have faced challenges, and transitions, for example from the traditional nursing home, to aging in place with home health care aids, an area that has surged.

Some see that  a recession is inevitable, or are we inevitably, say some, conjoined with European central banks that say the same things, or are we on rosier shores in the US, or are we simply rearranging deck chairs on the Titanic?

Of course, the Fed moves, calibrated as they need to be, will lead to less jobs, especially for those wage earners at the low end.

“Mohamed El-Erian, Allianz’s chief economic adviser, said on Sunday that the U.S. is heading toward a recession that was “totally avoidable” amid ongoing concerns about inflation and economic stability, reported The Hill on Sunday, and also said that there was simple mismanagement by the Fed.

“One is mischaracterizing inflation as transitory. By that, they meant it is temporary, it’s reversible, don’t worry about it. That was mistake number one. And then mistake number two, when they finally recognized that inflation was persistent and high. They didn’t act. They didn’t act in a meaningful way,” 

Taking a closer look at some significant changes that Inflation has done has led to a lessening in an area that many had thought steady, leisure and hospitality, whether it's hotel room service, or restaurant servers. 

Retail is also seeing a downward path with major retailers such as Walmart saying that they will cut their holiday hiring, while the online retail giant, Amazon says it will not. 

A gamble, maybe, or is caution, the watchword?

Meanwhile the tone from the White House is optimistic as President Biden said to workers at a Hagerstown, Md. Volvo plant, “Our job market continues to show resilience as we navigate through this economic transition, the pace of job growth is cooling while still powering our recovery forward.”

With the November midterms nipping at his heels Biden has tried to sell the middle course as a path to recovery, while his Republican opponents want to tag him, and him alone, with failure to address inflation, which is really the province of the Federal Reserve, but with swords drawn for a fight, truth doesn't matter, but votes do.

Many economists don’t necessarily believe in this cooling as having much effect, but it plays well in Peoria, as the old comedians used to say.