Biden Task Force to Examine "529" Savings Plans and Student Financial Aid Process Using IRS Data

Noting that increases in college tuition are growing much faster than family income, Vice President Biden on April 17 directed the Departments of Treasury and Education to look into ways to make 529 college savings plans more efficient and effective. Biden, who is chairman of the White House Task Force on the Middle Class, announced the initiative at a public meeting on college affordability in St. Louis, Mo. The task force plans to release a report based on the Treasury Department's findings before the start of the next school year.

Many families who save for college through 529 plans have seen a significant loss of value in their stock and fixed-income investments because of the continuing financial turmoil, noted a task force staff report. The dramatic drop in savings is particularly hard on middle-income families whose children are ready to go to college and who do not have the financial cushion to wait until the market improves. "We aren't interested in empty promises. We need real, substantive ways to reinvest in student aid and putting money directly into the pockets of students who need help affording a college education" Biden stated.

The task force also plans to consider measures to simplify the financial aid application process. One possible way is to allow the Department of Education to obtain financial data directly from the IRS on family income and assets, according to a staff report. Under the current procedures, students or their parents must complete the Free Application for Federal Student Aid (FAFSA) form, which contains more than 100 questions on income, assets, family characteristics and other items. According to The Institute for College Access and Success, nearly two-thirds of the questions on family income and assets can be automatically answered using IRS data.

"Completing the FAFSA requires families to sift through paperwork and transfer numbers from tax forms that they may or may not have readily available," noted the staff report. Requiring the student or family to answer only the questions on the FAFSA form that are not provided automatically to the Education Department by the IRS would reduce the number of errors among filers. Simplifying the FAFSA application process could "substantially increase applications or student aid as well as subsequent college enrollment," the report concluded. Such simplification would also remove the burden of requiring colleges and universities to verify the income information on the FAFSA form using tax returns.

By Paula Cruickshank, CCH News Staff

Source CCH Incorporated