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FAFSA rule changes requiring net worth of farms, small businesses

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WASHINGTON D.C (KWWL) -- Congress passed the FAFSA Simplification Act last year, and it's intention was to expand access to students in need of aid by adopting a new model formula, the Student Aid Index.

That index takes into account assets and net worth, which could have major impacts on rural Iowa students.

"It’s essentially asking farmers and small business owners to record their net worth of their farm or business," explains Tim Bakula, director of the Financial Aid and Scholarships office at UNI.

That ask is not an easy one.

"That net worth, it includes everything on the farm, it includes the barn, the combines, the cattle, the corn, the land-- the land is very expensive itself and it’s very hard for those families just to liquidate those assets real quickly in order to pay for college," says Mark Wiederspan, executive director of Iowa College Aid.

He adds, explaining, "under the current formula, if a family has 60,000 in adjusted gross income, their EFC would be roughly $7000 dollars. When you include the net worth, it’s very easy for a family that has a net worth of roughly a million dollars that their expected measure of paying for college goes up to about 41 thousand dollars," continuing, "when that sort of scale moves from 7 thousand to 40 thousand it hurts the students and families availability to get financial aid, particularly for some of our state aid programs."

UNI has a primarily Iowan student base, and they're expecting a possible drop in enrollment once the application opens.

"It has the potential to have a tremendous impact on the families we serve— obviously about 90 percent of the students at the university are from Iowa, large percentage of those families are from small family farms which is predominantly what we see in the state. By having to include that, it definitely has the potential to have an impact on their financial aid results," Bakula said. 

In response to the legislation, Iowa senators Joni Ernst and Chuck Grassley are joining a bipartisan effort to veto the new rule, in the 'Family Farm and Small Business Exemption Act'. 

"They tend to be capital rich, investment rich, but not necessarily rich in income. You’re going to have to borrow money or sell the farm to send your kids to college," says Senator Grassley. 

Senator Ernst adding, "it effects family farms, it effects ranchers, and of course small businesses all across the United States, so we have both Republicans and Democrats that are working together on this bill and I’m really grateful to have their support."

The legislation would exempt families from reporting farmland net worth and small businesses with less than 100 employees, just like it was before.

"If you look at the rural communities we know that many of those children, they do want to go to higher education after they graduate from high school. And as we talked about it we found that this rule would prohibit a lot of those kids from receiving the assistance that they need," Senator Ernst said.

"We’ve always used income as determining whether or not you qualify for student loans or even Pell grants. So this legislation would turn around a big mistake that was not fully considered last year when it past the congress of the United States," Senator Grassley said, explaining, "we would use the certification of income in the determining of whether or not you’re going to qualify for student loan, Pell grants, and have less emphasis upon assets."

Senators Grassley and Ernst also joined on a letter to the Department of Education, asking for action to be taken to protect rural families. 

Iowa College Aid released a report on their predictions on the impacts of the new rules changes, warning enrollment drops, especially in rural Iowa communities.

"I do anticipate that there will be a significant decline in college enrollment in our rural regions in Iowa, particularly where there is a large agricultural community. Many of those students are just not going to be able to afford to go to college," Wiederspan says.

The form opens in December for the 24/25 school year. Financial aid offices across the state are preparing for a lot of questions.

"There is some good that’s coming out of the FAFSA Simplification act, I think that’s really important to emphasize- those things might be different income protections within the FAFSA, which allows more students to qualify for more needs based financial aid programs like grants for instance," Bakula explains. 

"Complete FAFSA as asked, that’s always the first step of getting any type of financial aid, call our office as well as any other college that you’re looking at- that will have the ability to kind of individually review or create a financial aid offer that you can discuss with them to see if anything can be done to assist with bridging the gap to help college be affordable for ya,” Bakula said.

Without a resolution, Wiederspan warns the effects could be felt in the years to come.

"There is a state demand for an educated workforce, we’re already facing a workforce crisis the way it is, and I think it’s only going to compound it even more, if a lot of these students are being shut out because they just don’t have the ability to pay for college," he concluded. 

Wiederspan and Bakula both say if you're concerned, contact your legislators. Grassley adding, "not just from Iowa but all over the country, and particularly we need to hear it from small business and farm owners."