Can the idea of automatic tax returns be adapted to improve college financial aid?

The Kennedy School’s Susan Dynarski and Judith Scott-Clayton, in a working paper, put the cost of complexity in the student loan process at $4 billion a year, argue that it does not help target aid to the right students, and say it actually discourages some from applying.

Empirical evidence on the behavioral impact of aid suggests that complexity in the aid system undermines its efficacy. While simple, easily communicated aid programs have been shown to have a robust impact on college entry and completion, we have little to no compelling evidence that the traditional forms of student aid (which require a FAFSA) increase schooling for their target populations. Complexity may be the culprit. Simply put, potential college students cannot respond to a price subsidy if they do not know it exists.

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