Don’t punish families of farmers, small business owners
Family farmers and other small business owners are getting the short end of the stick under changes to the federal financial aid formula when it comes to qualifying for federal loans and school grants.
Federal elected officials must move quickly to ensure that young people from farm families and family-owned businesses are not blocked in their access to higher education due to their family’s business assets.
Each year, students planning to attend college or technical programs fill out the Free Application for Federal Student Aid (FAFSA). The purpose is to determine what share of expenses families are expected to contribute toward their children’s college or technical school education and the part that will need to be covered by student loans and grants. While primarily a tool for federal programs, colleges and universities often use the information in allocating schoolbased financial aid programs and grants.
Where things break down is in determining what the family’s contribution should be based on their income and assets.
When you add in the values of assets such as farmland, equipment and livestock, many farmers would look to be doing pretty good— at least on paper. The true picture could be very different and, as any small business owner or farmer knows, can vary as wildly as Wisconsin’s weather depending on many factors outside of their control.
The formula currently in use for the FAFSA takes this into account and uses the income from those assets in determining financial need. That formula is set to change under the FAFSA Simplification Act, which was approved in 2020 but set to go into effect for the 2024-2025 academic year.
Studies of the new formula find that if the net worth of your farm or business is less than $250,000 there won’t be much change between the old and new formulas. However, there will be significant impact if the net worth exceeds $500,000.
In terms of business assets, especially when looking at farmland values and buildings which may have been in families for generations, it doesn’t take long to cross that threshold despite what they are able to gain in real household income.
According to a report from the Iowa Student Aid Commission, a farm family with an adjusted gross income of $60,000 and a farm worth $1 million would be expected to contribute $7,626 annually for college under the current formula. Under the new formula, the same family would be expected to contribute $41,056 annually.
A nearly 600% increase in expected family contribution could quickly put dreams of higher education and degrees out of reach for children of farmers and other small business owners.
Contact Rep. Tom Tiffany and Senators Tammy Baldwin and Ron Johnson and urge them to join in a bill recently introduced by Sen. Joni Ernst (R-Iowa) that will restore exemptions for family farms and small businesses and fix the formula before it blocks access to education for Wisconsin’s farm and small business families.