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A new report suggests that many California college students don't receive the federal financial aid they're eligible for in part because of the red tape they encounter after submitting their applications.
The survey of 13 California Community Colleges, published this week by the Institute for College Access and Success, found that students whose financial aid applications were selected by the college for "verification" – similar in some ways to an audit – were 7 percent less likely to receive grants than those who were not selected. And the colleges subjected more students to this verification process than they are required to under federal law, at a cost of millions of dollars.
The bottom line of the study is that the good intentions of colleges and the federal government – to protect the massive-Pell Grant spending against fraud or other misappropriation – are having unintended consequences on needy students, creating a barrier between them and federal funding for college study at a time when students need help more than ever.
Low-income students who don't get financial aid are less likely to complete their educational goals. They often work more hours, drop out because of cash-flow problems or encounter other financial hurdles.
If all the students selected for verification at the 13 colleges had gotten financial aid at the same rate as students who weren't audited, an additional 1,200 students would have received the funding, the study found.
The findings are timely because the U.S. Department of Education just last month proposed changes to the rules that govern the verification process.
Problems with the process aren't exclusive to California, either. The Flint Journal in Michigan reports that thousands of community college students there lost out on money for school because of paperwork problems with their financial aid forms.
Here's how the verification process works: After students submit the Free Application for Federal Student Aid (FAFSA), the U.S. Department of Education flags some of them for the colleges to verify – a process that requires students to re-submit and document some or all of the information that they put on their application. Nearly all the students who are flagged are low-income, the study found.
This is where the red tape comes in. Some students were told by the agency that their FAFSAs were missing key pieces of information, such as required signatures or Social Security numbers. Four of five students who got these notices submitted corrected information and advanced to the next step of the process, but one out of five never re-submitted.
One student who was flagged for verification told the study's authors, "I tried to apply but my parents don't have Social Security numbers, and I don't know what to do." An administrator who was interviewed for the report said some students who get this notice from the federal government don't understand that it can be resolved so they can get aid.
Under federal law, colleges must verify 30 percent of their aid applicants. They don't need to audit every applicant the U.S. Department of Education flags. But many colleges try to do just that.
At all but one of the colleges surveyed by the report, administrators tried to verify all of the students who were flagged by the agency, which totaled 54 percent of all low-income applicants. That's not a cheap endeavor. Based on the U.S. Department of Education inspector general's 2002 estimates of the per-student institutional costs of verification, the colleges studied by this report likely spent between $1.7 million and $2.5 million on FAFSA verification.
Making matters more complicated, more than half the colleges surveyed collect additional information from students as part of the financial aid-application process that are not required by federal government – including copies of driver's licenses, for example.
It's possible that students who are tapped for the audit process are less likely to receive aid because they are, in fact, ineligible. But if that were true, the report suggests more of the students who actually go through the verification process would be deemed ineligible for aid. As it stands, about 91 percent of students who went through the process got money in the end.
So, how can colleges and the federal government tame the verification-burden beast? The report's authors recommend a few tactics: Colleges should reconsider steps in their financial aid-application process that are not required by federal or state regulations, such as checking driver's licenses.
They also should not verify more students than they have to. For the same reasoning, the report's authors also oppose the U.S. Department of Education's recent proposal to get rid of the 30 percent cap on verifications.
"Unless the college has a specific reason to believe that students' applications contain errors, routinely verifying everyone who applies or is flagged may have more costs than benefits," the report says.
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