A new federal law mandating the use of a free federal application form for college financial aid has resulted in revenue losses and layoffs for organizations that had provided the forms for a fee in the past.
The Educational Testing Service, the nonprofit firm that processed financial-aid forms under contract to the College Board’s College Scholarship Service, announced this month that it faces a substantial drop in its $38 million aid-form business and that it will lay off up to 300 workers, or 10 percent of its workforce.
The College Board, meanwhile, expects a $5 million to $6 million revenue loss and will lay off 12 of its 330 workers, according to officials.
But the law has had quite a different effect on American College Testing, another firm in the aid-application business. The Iowa City-based company won a contract with the U.S. Education Department to process the free federal form, and, as a result, has been hiring “several hundred’’ temporary workers to handle the increased volume, according to Richard L. Ferguson, the president of A.C.T.
“We’ve had a significant increase in workload, albeit the workload is changing,’' Mr. Ferguson said.
Drop in Volume
The shifts in the financial-aid business were caused by a provision in the reauthorization of the Higher Education Act, which was signed into law last year.
Under the measure, the federal government must provide a single form for students applying for federal financial aid. A.C.T. will process it free of charge.
In the past, the College Board and A.C.T. have provided such forms for students seeking all types of financial aid, and have charged processing fees.
The board and A.C.T. will, however, continue to develop and process forms for students applying for aid from higher-education institutions, which generally require more information than that provided on the federal form.
The new law is expected to result in as much as a 75 percent drop in volume for the fee-based forms, according to Kenneth W. Rodgers, the executive vice president for operations of the College Board. In response, he said, the board is reducing its workforce slightly and is freezing most expenses.
But the Princeton, N.J.-based E.T.S., which handles the more labor-intensive part of the operation, is taking a much larger hit. Company officials on April 1 announced a series of cost-saving measures, including the layoffs.
The “new reality’’ demands “timely actions that are difficult for all concerned,’' said David Brodsky, the firm’s executive vice president.
