December marked a big win for students and college access organizations across the nation when President Trump signed the FUTURE (Fostering Undergraduate Talent by Unlocking Resources for Education) Act into law.
The bill, which received broad bipartisan support, streamlines the federal financial aid process and also provides $225 million in permanent annual funding to Historically Black Colleges and Universities, otherwise known as HBCUs. Originally filed by Representative Alma S. Adams of North Carolina’s 12th district, the FUTURE act passed the U.S. House of Representatives in September of 2019 and was later amended by Senator Lamar Alexander of Tennessee to include an overhaul of the federal financial aid process. These changes are anticipated to make the FAFSA easier for students and families to complete, as well as virtually end the verification process.
Here is what you need to know about the FUTURE Act and how it will impact students:
How Does the FUTURE Act Help Florida Students?
Shorter, Easier FAFSA Application
Filling out the FAFSA is not an easy task, especially for students who typically file as “dependents.” Currently, the FAFSA is over 100 questions long and often requires applicants to manually enter information related to household income and family assets. For many students, collecting tax documents and filling out a lengthy application is a deterrence to getting the money they need to attend college. In Florida, over 50% of high school seniors had not completed a FAFSA by June 2019, resulting in over $100 million in unclaimed federal Pell Grants.
Before the FUTURE Act, some FAFSA filers could use the IRS Data Retrieval Tool (DRT). This tool helps FAFSA applicants easily access their tax data directly from the IRS. However, the DRT was not available for certain FAFSA filers including married couples filing separately, those who filed as the head of household, and those who did not file taxes. These filers would have to manually input their income data and information.
The FUTURE Act mitigates these issues by amending the Internal Revenue Code to allow the IRS to share data with the Department of Education. Now, applicants who couldn’t use the DRT before will be able to have their tax information imported directly to the Department of Education via the DRT. This saves them the added step of manually providing their tax information or proving that they never paid taxes in the first place.
By directly importing all applicants’ income data through the DRT, the legislation will also reduce the number of questions on the FAFSA by 20% or up to 22 questions. Additionally, through this simple fix, all students will be able to use the DRT regardless of their tax-filing status, ultimately saving students time and reducing potential application errors.
Lowered Need for FAFSA Verification
Because the current FAFSA application process often requires students and families to manually input their financial information, application mistakes are common. In order to make sure that students are getting the correct award amount, the Department of Education randomly flags students to go through a tax audit-like process known as FAFSA verification.
National College Access Network found that this process has a disproportionately negative impact on low-income students; roughly half of all Pell Grant-eligible students are flagged for verification at some point during their educational career. Of the low-income students who are flagged for verification, only 56% go on to receive a Pell Grant, whereas 81% of their low-income peers who were not selected for verification go on to receive a Pell Grant. If students are unable to complete the verification process, they do not receive their financial aid and are significantly less likely to enroll in college.
The FUTURE Act resolves the need for verification because the students’ income data will be coming directly from the IRS and, as a result, is automatically verified.
Simplified Student Loan Repayment
In addition to the streamlined FAFSA application process, the FUTURE Act also benefits students as they repay their federal student loan debt.
Currently, borrowers utilizing Income-Driven Repayment (IDR) plans, which lowers their monthly payments to a manageable amount based on their income, have to certify their income each year. If, for some reason, the borrower missed their IDR recertification, they would automatically be taken off their IDR plan, which would instantly increase their monthly loan payments, sometimes by more than double what they had been paying.
These steep, unexpected rises in the borrowers’ payments put them at risk for delinquency or default and can even add additional interest to their loans.
Once again, the data-sharing mechanism in the FUTURE Act helps resolve this issue by allowing the Department of Education to access a loan recipient’s tax information. Now, the Department of Education can automatically verify borrowers’ income, eliminating the need to manually share their data each year.
Borrowers who plan on using IDR plans will now be able to check a box authorizing their consent to share their income data with the Department of Education each year. After consenting the first time, the process would become automatic and they would no longer need to manually share their income data with the department.
When does the new law take effect?
While the FUTURE Act does not specify an implementation date for these FAFSA changes, FCAN and other organizations are hopeful that it will be effective as soon as next school year. FCAN will continue to monitor progress and provide updates as more information is available.