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‘It really is unfair': Change to student aid formula would hit Iowa farm families
Students from families that own farms or small businesses could see less financial aid
Apr. 23, 2023 5:00 am, Updated: Apr. 23, 2023 6:14 pm
RIDGEWAY — Darcy and Eric Wemark and their family milk nearly 600 cows at their dairy operation in Ridgeway, near Decorah in northeast Iowa.
The family also has 450 heifers, a 2,500-head swine facility and farms about 1,500 acres of corn and soybeans on land it mostly rents.
The couple’s eldest son, Carson, is finishing his first year at Iowa Central Community College in Fort Dodge, where he’s studying agronomy. The 19-year-old plans to carry on in the family business, as does their eldest daughter, Addison. The high school senior plans to head to the University of Wisconsin-Platteville to study dairy science next fall.
Carson currently receives federal financial aid through a Pell Grant to help the family pay for the roughly $16,000 annual expense to send him to college, including tuition, fees, room and board, and other expenses.
“It makes a huge difference,” Darcy said of enabling her son to pursue his passion, launch a meaningful career and carry on in farming.
Her daughter, however — and the Wemarks’ two younger children — may not be so fortunate.
A change in the federal student aid formula could mean lower levels of financial aid for children whose parents run family farms or small businesses.
Iowa college and university officials are calling on Congress to fix the issue before the new change is implemented in December for the 2024-25 academic year.
“It’s going to have a very profound negative impact on many of our students,” said Jesse Ulrich, president of Iowa Central Community College.
Currently, a 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 new federal financial aid formula that will launch later this year, that same family would be expected to contribute $41,056, according to a report by Iowa College Aid.
Iowa College Aid anticipates many family farms in Iowa with a net worth of more than $500,000 will be negatively impacted. Research from Iowa State University found that the average net worth of farms in Iowa was approximately $1.9 million in 2021.
Currently, the net worth of farms or businesses with fewer than 100 employees is exempt from the federal aid formula. A 2021 law that overhauled the federal student aid system removed that exemption.
The prior formula only counted a family’s income off that land, rather than its value on paper.
“It’s going to make them appear that they’re richer than they actually are,” said Mark Wiederspan, executive director of Iowa College Aid.
Wiederspan noted that farms and businesses are different from other assets that could be sold for cash to pay for college.
“These are investments that include everything on the family farm,” including combines, tractors, machinery buildings and land, he said. “And those investments on family farms are for their livelihood. It’s for them to invest in keeping the business running, not necessarily as investments for themselves.”
Similarly, if a family had two members in college and had an expected family contribution of $5,000, that total was split between the two students. Under the change to the Free Application for Federal Student Aid (FAFSA), that contribution would be for each family member in college, increasing the financial burden for families with more than one member in college.
“It really is unfair to our students,” Ulrich said. “In reality, while there may be value in the farmland, most of us in the state of Iowa know that they may be property-rich, but they’re very much cash flow poor” due to the cyclical nature of the farm economy and other small businesses.
“We’re talking about family businesses and small companies that are just trying to survive, let alone having a negative impact on educating their children,” Ulrich said.
He said about 80 percent of Iowa Central students have a financial need, and about 30 percent are first-generation students.
“Our goal is for students to come to Iowa Central, finish their degrees and certifications in the shortest amount of time possible, with the least amount of student debt, so they can have a better life,” Ulrich said. “Any changes like this has a negative impact not only on them, but on our education system in Iowa as a whole.”
Law aims to expand Pell grant eligibility
The law streamlines the application process and increases the number of Iowans eligible to receive federal Pell grants. Where possible, the law mandates federal student aid officials use data received directly from the IRS to calculate federal Pell Grant eligibility and determine financial need.
While a step in the right direction to make postsecondary education more affordable and accessible, in states such as Iowa — where family farms and small businesses are the backbones of many communities — Wiederspan and administrators across the state representing Iowa’s public and private colleges and universities say the change will have the opposite intended effect for some Iowans.
For example, while in many cases some students from family farms may be eligible for the minimum Pell grant award amount — about $650 — they may not qualify for state need-based financial aid, or financial aid offered by colleges and universities, that use the new formula as a threshold to determine eligibility.
“It’s going to immediately knock them out,” Wiederspan said. “They will get some aid from the federal government, but the amount is so small that these families” will likely be forced to borrow more.
Financial aid administrators for Iowa’s three public universities also shared their worries about the inclusion of the net worth of family farms and small businesses in the federal needs analysis formula during a February meeting of the Iowa Board of Regents.
New timeline will affect admissions, housing, other services
The new application is expected to launch in December. The Department of Education has not provided the exact date the form will be available.
Brenda Buzynski, director of student financial aid at the University of Iowa, said implementation of the law will change the timeline of how and when colleges and universities package financial aid offers, “which then impacts admissions, housing and other student service operations.
“Overall, our entire recruitment and financial aid awarding cycle will be altered,” Buzynski said at a recent Board of Regents meeting.
Currently, the application for federal aid opens on Oct. 1, which allows UI time to provide financial aid offers by mid-February. Buzynski said that timeline will now have to change for fall 2024.
Buzynski said eligibility for financial aid could decrease for some UI students, while others may experience a significant change in their financial aid offer.
For example, the new methodology would no longer reduce the expected family contribution due to having more than one dependent student enrolled in college, which would impact their financial aid eligibility.
For example, under the current methodology, if it is determined that a family can contribute $20,000 to the cost of education, and there are two dependent children in college, the expected contribution would be reduced by half. The new aid formula does not reduce the expected family contribution, Buzynski said.
Iowa college and university officials said it is hard to estimate how many families and students in the state would be affected by the change in the federal aid formula, as they do not collect historical business income or farm value information for their students.
Congress urged to restore exemption
Legislation to restore the exemptions for family farms and small businesses has been introduced Congress. Iowa Republican U.S. Reps. Randy Feenstra, Mariannette Miller-Meeks and Zach Nunn have signed on as co-sponsors of a House bill. And there appears to be bipartisan support in the Senate to address the issue.
Iowa Republican U.S. Sen. Joni Ernst introduced a bill last week with Montana Democratic Sen. Jon Tester to reverse the recent changes.
Ernst co-led a letter with fellow Iowa Republican U.S. Sen. Chuck Grassley to the U.S. Department of Education warning of the potential impacts of the FAFSA Simplification Act on need-based student aid.
“Parents should not be forced to leverage their business to ensure their child has access to financial aid,” Ernst, ranking member of the Senate Small Business Committee and member of the Senate Agriculture Committee, said in a statement to The Gazette. “Small businesses and family farms are vital to rural America, and this legislation ensures the next generation of students will have the opportunity to pursue higher education should they choose to do so.”
The U.S. Department of Agriculture considers a family farm to be any farm where most of the business is owned by the operator or family members.
Family farms of various types together accounted for nearly 98 percent of U.S. farms in 2021.
Family operations that make less than $350,000 in gross income account for about 89 percent of all U.S. farms, according to the USDA. Large-scale family farms with $1 million or more in gross income accounted for about 3 percent of farms, but 47 percent of the value of production.
A small business, for the purposes of the FAFSA, is one with fewer than 100 employees.
In order to speed up the process of feeding each calf individually Addison Wemark takes the UTV on Thursday, April 20 at her family's farm in Ridgeway. (Geoff Stellfox/The Gazette)
Addison Wemark surveys the work left to be done before taking a break on Thursday, April 20 at her family's farm in Ridgeway. (Geoff Stellfox/The Gazette)
Addison Wemark puts away the dairy cows in order for part of the barn to be cleaned, on Thursday, April 20, at her family's farm in Ridgeway, Iowa. (Geoff Stellfox/The Gazette)
“One factor that separates farms from other businesses is that farm debt varies widely throughout the year,” the senators wrote in their letter to the Department of Education. “Under the FAFSA Simplification Act, this debt would be subtracted from assets. While that effort is relatively straightforward for small businesses that have a steady stream of revenues and expenses, the nature of farming makes this calculation much more challenging.”
Crop farmers must stretch a single harvest to last throughout the year, and livestock producers are dependent on market availability and readiness for their herds, they write.
The variations can result in drastically different asset calculations depending on exactly when the FAFSA is completed.
“Because these asset calculations will directly inform a family’s eligibility for financial aid, it is imperative that the Department provide guidance on how farm debts and assets will be considered for purposes of federal financial aid programs,” the letter states.
More debt could complicate farms’ future
Darcy Wemark, the Decorah dairy farmer, worries the change will lead to a huge financial burden for her children, or force the family to sell a combine to pay for college.
Including the family’s farms assets into their children's financial aid calculation would more than likely result in them getting no aid for college, she said.
“We have a fairly good-sized operation. But we also have a lot of debt,” Darcy said. “Farming is a day by day financial challenge. Cash on hand is minimal with most of it being put back into your investment. With these new changes, it appears they are putting a cash value on your investments, which are really things you are using to grow your business and see farming continue in the future.”
She said she worries about her children graduating with large student loan payments on top of farm debt to keep the family operation going, and struggling to cover costs.
“For these kids going into ag … I’m assuming most of them are coming back to a family farm that’s trying to grow, and everything costs a lot of money,” Darcy said. “It’s going to be hard for them to invest and take over management of a farm.”
Comments: (319) 398-8499; tom.barton@thegazette.com
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