Students have increasingly looked to the web for financial aid.
Over the past decade and a half, the internet has made it easier for families to learn about, find, and apply for college scholarships, government grants, and other types of student financial aid. This transformation of the financial aid industry continues even today with a simplified federal aid form and a new XML data standard that will make applying for scholarships easier than ever.
I have acted as a catalyst for some of these major developments and have a unique perspective on the role of the internet in paying for college.
I founded the FinAid web site in the early 1990s to help people plan for and pay for college by making the process easier to understand and more efficient. FinAid was one of the internet’s first web sites, not just one of the first web sites about student financial aid. It is also one of the oldest web sites still in existence.
The FinAid site started as a collection of answers to frequently-asked questions about paying for college. I published a book about scholarships and fellowships for math and science students with Prentice Hall in July 1993 and received questions by eMail. Rather than answer the same questions again and again, I posted the answers to a web page and responded with instructions on how to access the web.
A few months later I started proactively answering questions before they were asked, and then the web site took on a life of its own. Today the FinAid site has more than 100,000 new unique visitors a week and is still the most popular web site for student financial aid information, advice, and tools. Since the site’s inception, it has helped more than 50 million people figure out how to pay for college.
Before the advent of the web, there were dozens of fee-based scholarship matching services. Students would complete a paper profile with details of their academic, extracurricular, and personal backgrounds and mail it with payment to the scholarship matching service. The scholarship matching services would compare the profile with a database of scholarships and respond to the student a few weeks later with a printout of all the matching awards.
In 1994 I approached each of the major scholarship databases with an offer to help them put their database up on the web and to add a link to their web site from the front door of the FinAid site, for free, if they would agree to make their database available for free on the web.
The self-service nature of the web site would enable them to serve many more students, and the greater traffic would make the web site attractive to advertisers. Students could get their scholarship matches in less than an hour instead of weeks, and they could use tools provided by the site to manage their matches.
The profile data also would permit more effective targeting of advertisements so that students would see only advertisements of interest to them, in effect making the advertisements part of the site content. The advertising revenue eventually would exceed the fee revenue they were collecting from students and would permit improvements in the size and quality of the database. I demonstrated a small online scholarship database I had implemented to illustrate how this might work.
At the time, only one company—the predecessor of FastWeb—took me up on the offer.
But one was enough.
It was and remains very difficult for paid services to compete with a free service. A year later, several other scholarship databases took me up on my offer and became available online for free. With several high-quality scholarship databases available online for free, there was no going back to a paid service.
The negligible marginal cost of serving each additional student on the web and the scalability of a web-based service exposed the cost structure of the old business model as an instability point. The internet helped shift the entire scholarship search industry to a more stable and beneficial state.
The new business model not only provided a valuable service to students for free, but also helped eliminate many fraudulent services and scholarship scams.
The internet also enabled a more efficient and effective application process for federal student aid. At the 1996 national financial aid conference, Leo Kornfeld, then-CIO of the U.S. Department of Education (ED), asked me how difficult it would be to implement an online version of the Free Application for Federal Student Aid (FAFSA). I had a prototype implemented within a few weeks, complete with edit-checks and primitive skip logic.
Edit checks yield a more accurate application by detecting potential errors in application data, such as conflicting responses and inconsistent relative magnitudes. For example, if the applicant specified a value for “taxes paid” equal to the value reported for “adjusted gross income,” it was almost always because of an error. Another useful tool for detecting errors involved having the applicant enter the same information in two different forms, such as date of birth and age, and identifying conflicts between the two values.
Skip logic eliminates sections of the application form when there is no need to ask the applicant those questions. For example, independent students are not required to submit parental information, so those questions can be skipped. Likewise, once an applicant has been found to be an independent student, there is no need to ask the remaining questions that determine independent student status, because they have been made redundant by the response to an earlier question. (The question about applicant marital status is retained, however, because it plays a role in some of the edit checks.)
The independent student status questions are organized according to the frequency of a positive response, to maximize the likelihood of skipping the remaining independent student status questions. Skip logic dynamically provides the applicant with a shorter form, saving applicants time and anxiety.
The National Association of Student Financial Aid Administrators facilitated a meeting with ED staff, including Betsy Hicks, deputy assistant secretary for Student Financial Assistance. After seeing a demo of my prototype, ED contracted with NCS for a full-scale implementation. FAFSA on the web went live on June 30, 1997 for the 1997-98 award year.
This has saved the federal government more than $10 million a year in printing, mailing, and processing costs.
FAFSA on the web not only has gained in market share, but also has contributed to a doubling in the total number of FAFSAs submitted. Last year alone, the number of FAFSAs submitted increased by more than 20 percent as compared with 2008.
More students can submit the FAFSA online, because the internet is not subject to the same resource constraints as a printed application form. The online FAFSA makes it easier and more convenient for students to apply for financial aid. Today FAFSA on the web has more sophisticated edit checks, more intelligent skip logic, real-time data matching with other government databases, electronic signatures, and optional pre-filling with IRS data. This saves applicants time and improves the accuracy of their application data.
Even so, more than two-fifths of undergraduate students do not apply for federal student aid—and more than a quarter of these students would qualify for federal grants.
These students are leaving free money on the table. In addition, three-fifths of students who borrow private student loans instead of less expensive federal student loans do so because they do not submit the FAFSA.
The failure to apply for federal student aid affects retention and graduation rates, especially among low-income students. Accordingly, a key current focus is on further simplification of the FAFSA to make it easier for students to apply.
The internet also can make scholarship applications more efficient. FinAid and FastWeb merged in 1999, and I quit my job as a research scientist at a Japanese software laboratory in 2000 to focus full-time on the web sites. One of my first projects involved implementing “eScholarships” using a variety of techniques such as Optical Character Recognition (OCR) technology, automated form structure extraction, and manually created custom forms.
Unfortunately, this technology was ahead of its time, as scholarship providers were not yet comfortable with electronic scholarship applications. They insisted on being able to print out the application data on their original application forms. Scanning in the forms, correcting OCR errors, and recreating the look and feel of a paper form proved to be too labor-intensive to be practical for more than a few dozen scholarship programs.
We waited five years before revisiting the technology. Since 2007, FastWeb has worked with the Michael and Susan Dell Foundation under the auspices of the National Scholarship Providers Association to produce an XML scholarship data standard. This allows students to apply electronically for scholarships by reusing their scholarship search profile data, as well as data and essays from other scholarship applications. This makes applying for a scholarship as easy as clicking on an “Apply Now” button on the scholarship description page on the FastWeb site.
The Michael and Susan Dell Foundation has developed a toolkit called ScholarSnapp to help scholarship providers adopt the standard.
The internet has played a pivotal role in making it easier for students to learn about financial aid and apply for private scholarships and government grants—and that, in turn, has made college more affordable for more people.
Mark Kantrowitz is a nationally-recognized expert on student financial aid, student loans, scholarships, and paying for college. He is the publisher of FinAid.org, the most popular free web site for clear and unbiased student aid information, advice, and tools, and FastWeb.com, the largest and most frequently updated free scholarship matching web site.