FAFSA, College Financial Aid

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Urban Matters [UM]: Kim, back in 2020 Congress passed a law intended to make the often-frustrating process of applying for college financial aid less burdensome and anxiety-provoking for students and families. It was supposed to start this year. But the takeoff has been pretty bumpy. What happened?

Kim Nauer [KN]: Yes, and unfortunately we may be looking at a crash landing. The FAFSA Simplification Act was billed as the most dramatic change to financial aid in 40 years. The U.S. Department of Education was tasked with a complete overhaul of the Free Application for Federal Student Aid, better known as FAFSA. The hope was that a simpler FAFSA form and new aid formulas would ensure that far more low-income students got access to Pell Grants and low-cost student loans. Federal Student Aid, the agency in charge of the FAFSA, rebuilt the form from top to bottom, promising that a simpler FAFSA would deliver more and larger Pell Grants to 1.5 million more students

The good news? This new FAFSA, when it works, is a remarkable improvement on prior generations of the FAFSA. It can take less than 30 minutes to fill out online. The bad news? The rushed rollout has been botched, with both Congress and college financial aid officers getting increasingly frustrated and angry about what is happening. “Students and families were promised a simpler financial application process,” fumed the president of the National Association of Student Financial Aid Administrators last week, heretofore a group that has worked in close partnership with Federal Student Aid. “Too many families have been met with frustration, confusion, and delay.” 

UM: What’s going wrong? 

KN: The Education Department is contending with two big issues right now. The first, affecting millions of families, is that Federal Student Aid was required by law to launch the new FAFSA by December 31. The agency knew the code for the online form wasn’t quite ready and announced in December that there would be a “soft launch” in January, with the goal of fixing most problems by February 1. But we are hitting that date this week and the list of technical issues–many of which prevent families from even starting the form–just continues to grow. Initially, patient media coverage, calling these problems “glitches,” is morphing into a “nightmare” in some corners. 

Importantly, the worst problems are affecting particularly vulnerable families, like students with parents who are undocumented. Experts speaking at a recent webinar co-hosted by Immigrants Rising stated the FAFSA is “absolutely not working” for mixed-status families. “We’re talking about millions of individuals who are college-age,” noted the organization’s director of higher education. The sheer number of technical problems–and the fact that the FAFSA helpline is completely overwhelmed–will disproportionately affect low-income families and students of color, who rely heavily on the FAFSA and government aid, advocates note. 

The second issue, which fully surfaced last week, is that the Education Department neglected to update family income tables that are critical in calculating how much federal aid a family may be eligible for. Initially, Federal Student Aid ignored calls to update these tables, arguing that this would further delay the FAFSA rollout. But NPR reporter Cory Turner started reporting on the problem in early January, eventually forcing the Education Department to respond last week.

UM: What happened?

KN: Another dramatic moment, which made headlines and is threatening to derail the college funding process this season. The FAFSA collects income and asset information from students and their families in an attempt to figure out how much money might be available for college. An important part of this calculation is something called the “Income Protection Allowance.” Families aren’t expected to spend every last dime they have on college tuition (though many parents would beg to differ). The amount to be protected this year was calculated way back in April 2020. These numbers should have been updated for inflation. When updated, families will receive an 18 percent bump in how much income is protected on this year’s FAFSA

After the Education Department did the math, they realized that this administrative change was worth a whopping $1.8 billion in aid to students heading to college the coming school year. The Education Department had been warned for more than a year by financial aid trade groups that this could be a huge problem. Federal Student Aid just announced yesterday that colleges won’t receive student FAFSA information until mid-March

UM: What does this mean for students and their families this year? 

KN: Great question. The FAFSA is already months late and colleges need the FAFSA’s calculations to get their own financial aid offers out the door. Federal Pell Grants and low-cost loans are crucial for low-income students. And while middle-class and higher-income families aren’t eligible for federal subsidies, colleges use the FAFSA to figure out how much institutional aid–or “merit aid”–they need to offer to convince a family to enroll. College access and trade groups warn that students won’t have time to compare their college offers before the traditional May “Decision Day” deadline, leading students to make poor decisions or “forego college entirely.” While there will eventually be more aid for low-income students and families, the delays “threaten to harm the very students and families that federal student aid is intended to help.”

UM: Should we be concerned about the future of the FAFSA? 

KN: The FAFSA has always had aggravating technical issues, but this year has been a doozy. I expect that everything will get sorted out and we’ll have a calm–and perhaps celebratory– time when next year’s FAFSA opens in October. 

But there is a bigger issue we need to worry about. All of this feeds into a growing narrative that college is too expensive and not worth the aggravation and cost. We are seeing analysis and stories almost daily in the media on this theme. 

Just this month, both liberal and conservative outlets openly questioned the value of college with thick pull-out sections in their print editions: From the Wall Street Journal: Why Americans Have Lost Faith in the Value of College. Asks The New York Times: Why is Paying for College So Complicated? (And Is It Worth It?). Yes, the FAFSA’s takeoff has been bumpy. But what we really need to worry about is a possible crash of our financially overburdened college education system.

Kim Nauer is a project director at the Center for New York City Affairs at The New School and founder of the website Understanding FAFAS. In addition to her work on financial aid, she has authored major reports on chronic student absenteeism, college preparation, and other subjects related to New York City public schools.

This article was first published in Urban Matters, in a slightly different form, on January 31, 2024. Urban Matters is published by Center of New York City Affairs at The New School