27 Aug

Should the Cost of Living Affect Financial Aid?

The financial aid system is constantly going through changes, but even the overcomplicated Free Application for Federal Student Aid (FAFSA) never seems to give schools a perfect picture of how much aid a family really needs.

Since he took office in Fall, President Obama’s administration has beenĀ working on some of the larger problems in higher education, including efforts to simplify the FAFSA and help provide better college access for students at all income levels. A new proposal in Congress could help close the gap between the aid so many families need and the insufficient funds provided by their FAFSA filing results–or it could make things even worse.

The Ins and Outs

Up to now, the federal aid award process has focused almost exclusively on the money coming in with little or no emphasis on what families have to pay out. However, Congress recently commissioned a study from the Government Accountability Office (GAO) to determine whether adding that consideration would be beneficial to students.

Congress was interested in considering the addition of a “cost-of-living adjustment” to the current federal aid award formula. They felt that this additional information could potentially help families who live in higher-cost areas such as Los Angeles and New York by granting them extra financial aid. On the other hand, it would reduce federal aid to those students who lived in areas with lower-priced housing.

The Findings

The GAO report considered three different options proposed to help integrate geographical housing costs and living expenses.

Unfortunately, although it sounds like a good idea, the change might hurt more than help the majority of students. The report concluded that changing the current formula would help about 17% of students, but at the same time it would reduce aid awards to approximately 37% of students.

Students currently receiving Pell Grants, who also happen to be the students with the lowest family income, would benefit the most from changes to the formula. These students could see a potential $2,000 more in aid if they live in expensive areas.

A Step Forward, or Backward?

The complexity of adding this new step is yet another downside of the new plan. Adding more information to the current federal form (which is already quite complicated) would go against President Obama’s efforts to simplify the FAFSA.

Whether Congress will pursue the cost-of-living aid reform remains to be seen, but as always, I promise to keep my eye on it for you.

All the best,
Deborah Fox

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One Response to “Should the Cost of Living Affect Financial Aid?”

  1. 1
    Critique of Fox College Funding | College blog reviews Says:

    […] This blog is intended chiefly for families who are unqualified for college aid. In an entry about cost of living and financial aid, the readers are offered helpful insights on how one’s cost of living can affect his or her […]

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