Spring is here and so too is tax season. I’m probably not alone in admitting I dread it—or at least I usually do. But this year, I found my new best friend: TurboTax.
The tax prep software sent me emails assuring me the process would be easier. And so, with a few nudges, I decided to give it a try. TurboTax delivered on its promise. It prefilled known fields, helped me navigate the complex tax code, and guided me through a personalized experience. Not only did I finish my taxes well before the deadline, I also found the process to be easy…and even enjoyable!
This made me wonder: could the same nudging and guidance of TurboTax apply to the similarly complicated financial aid process so more students complete the FAFSA and do so on time?
Improving FAFSA completion rates is important—despite the availability of college funding, including “free money” like Federal Pell Grants, more than $2.9 billion of federal financial aid goes unclaimed each year due to incomplete FAFSA applications. This limits both access and opportunity.
The problem is bigger than you think
As our research team examined prevalent obstacles to student success, we were struck by how often students leave college because they don’t secure the financial aid for which they’re already eligible.
Refiling the FAFSA every year is crucial for Pell Grant recipients to maintain their aid, yet research indicates that 15 to 20% of Pell Grant recipients in good academic standing do not successfully refile their FAFSA. Pell-eligible sophomores who fail to refile FAFSA are 28% more likely to withdraw.
In addition to the potential loss of revenue from drop-out students, institutions must embrace the moral imperative to ensure that students secure needed aid so they can remain in school. Otherwise students run the risk of ending up with crushing debt and no degree.
Why the needless complexity?
Why do students have so much trouble obtaining and maintaining financial aid? The National Bureau of Economic Research’s Susan Dynarski and Judith Scott-Clayton determined that the process of filling out the FAFSA, with its more than 100 questions, is more difficult than filing your taxes.
While some in higher education might argue that navigating financial requirements is a part of college and adult life, Chronicle of Higher Education writer Beckie Supiano notes, “Filing the FAFSA isn’t mean to be an admissions test.” Students who meet admission requirements shouldn’t be denied access and opportunity simply because the process is bad or they lack financial literacy.
Just as TurboTax has simplified the process of filing your taxes, couldn’t we provide students with a simpler, guided path to completing the FAFSA? EAB has previously explored nudge theory and its application to improve student success. As we explored solutions to improve financial aid outcomes for low-income students, we found that nudge messaging can help here, too.
Nudging nets big impacts
Researchers Ben Castleman of the University of Virginia and Lindsay Page of the University of Pittsburgh wanted to find effective, low-touch interventions to improve FAFSA refiling rates. They sent personalized text messages to first-year community college students with information about where to obtain help with financial aid, as well as reminders about important aid-related deadlines and requirements and assistance on financial-aid related processes.
Students who received text messages were nearly 12% more likely to continue to their second year than students who did not receive messages. At a cost of only $5 per student, these simple interventions netted huge returns in tuition dollars retained.
Testing another nudge tactic also proved promising. ideas42, a behavioral economics lab, partnered with Arizona State University (ASU) to increase on-time FAFSA completion. In 2014, just 18% of continuing ASU students submitted the FAFSA before the university’s March 1 priority filing deadline. Applying after the deadline put students at risk of missing out on their maximum financial aid package from ASU.
ideas42 found that students simply forgot to file by the priority deadline, and even when they did start early enough, they were deterred by a number of difficult steps. Students struggle to gather financial materials from their families and must sort through an overwhelming list of income categories to determine which financial information they need to report.
To address this barrier, ideas42 designed a series of emails incorporating behavioral interventions like breaking the process down into digestible steps and showing students their progress. For example, some emails encouraged students to set aside a small amount of time each week to gather one or two pieces of information so that they would have all they needed by the deadline. Families who received follow-up emails were 72% more likely to complete the application and file by the priority deadline.
Take it a step further
By directing FAFSA applicants’ attention to intermediate steps and supplying them with crucial background information, students were able to tackle the otherwise confusing financial aid application process.
These studies, and inspiration from outside the industry, give me hope that we can make financial aid—and thus college—a little more accessible. Nudging is a proven tactic. Now, imagine if we could take this a step further and do the same for financial aid or perhaps other complex, college processes just as TurboTax has done for taxes.