Federal Student Aid Need Analysis System: Background, Description, and Legislative Action

Publication Date: February 2006

Publisher: Library of Congress. Congressional Research Service

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Research Area: Education

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Abstract:

A federal need analysis system underlies the annual allocation of billions of dollars (more than $73 billion in FY2005) in student financial aid supported by Title IV of the Higher Education Act (HEA) (P.L. 89-329, as amended). The system has regularly been characterized by many as too complex, creating a barrier for students seeking financial assistance, especially low-income students. In the 1992 Higher Education Act (HEA) amendments (P.L. 102-325), Congress overhauled the federal need analysis system to create a "simplified" system consisting of a free, common application form and a single methodology for determining the expected family contribution (EFC) for students desiring to attend postsecondary school. The new system was intended to simplify the process for applying not only for federal student aid, but also for state and institutional aid. More than 14 years later, simplification of need analysis remains a perennial issue. Many researchers and policymakers continue to debate the complexity of the federal need analysis system. They remain concerned with ensuring that the system is able to accurately gauge an individual's ability to contribute to the cost of a college education.

This report provides an overview of the federal need analysis system, including a discussion of recent legislative changes and proposals. This report will be updated as warranted by significant legislation.