The student piggy bank | AI-generated image

Urban Matters: Kim, it’s been a memorably bad year in the world of college financial aid. The US Department of Education had promised a “Better FAFSA,” a new and streamlined Free Application for Federal Student Aid that would be quick to fill out and boost awards for more low-income students. Then the rollout was appallingly botched. What was the effect on the high school class of 2024?

Kim Nauer: It looks like far fewer students will be going to college this year, thanks to the Education Department’s FAFSA fiasco. By mid-June, FAFSA completion rates for the high school graduating class were down 13 percent from the previous year. This decline is twice the magnitude seen during the pandemic, which foreshadowed a 7.4 percent drop in enrollment at the time.

Colleges rely on FAFSA numbers to create aid packages for students. They didn’t get anything from the federal government until late March—months later than usual—and the data they were getting was riddled with errors. By mid-April, only one-third of colleges had sent out offers, according to an industry poll

By May 1, the traditional “Decision Day” in the application process, this number climbed to two-thirds of students. So more than 30 percent of students were still waiting for financial aid offers as of mid-May, according to this poll. In a normal year, most colleges would be getting offers into the hands of students by March at the latest, giving students plenty of time to compare offers and make a good choice. 

Believe it or not, many students are still waiting for offers because of continuing technical problems with the FAFSA. For many students, final offers won’t come until mid-August. 

UM: Most students rely on some kind of tuition discount, but financial aid packages are crucial for students from lower-income homes. Where do things stand there?

Nauer: It’s heartbreaking when you see which students and families were locked out of the financial aid process over the course of this chaotic FAFSA season. Completion rates for minorities and low-income students were down nearly 15 percent. Students in rural and impoverished states opted out dramatically, with Alabama and Mississippi reporting the steepest declines. 

Most egregiously, Federal Student Aid created an insurmountable security wall that prevented many students with undocumented parents from getting the FAFSA done until after May 1. 

The new FAFSA relies on an intense set of security protocols. Every student and parent is required to get their own login, called an “FSA ID.” Each family member is run through an identity check by the Social Security Administration when they sign up. 

Those without Social Security numbers were required to go through “identity verification,” a process that hardly ever worked. When dogged parents and students would try to call Federal Student Aid for help, they were put on hold, hung up on, and thrown into email limbo. 

Parents who were eventually able to get an FSA ID would then find that FAFSA didn’t work for them. Federal Student Aid announced fix after fix after fix until April 30, when the agency finally gave up and took down the whole security system. To this day it remains unfixed.

Federal Student Aid may have miscalculated the size and demand from this group. A terrific analysis published by EdTrust notes that there are 22 million people living in mixed-status families in America. About a quarter are under 18, many undoubtedly with college aspirations. That’s orders of magnitude greater than the roughly 3,500 families the Education Department had estimated would be affected by the identity verification system.

UM: Media attention has been focused on what this turmoil has meant for students. But hasn’t this also been bad for colleges, especially those heavily reliant on tuition for their cash flow?

Nauer: Certainly, financial aid officers are on their last nerve—and many are quitting. And it’s true that some predict that there could be a major fallout from this year. Smaller institutions were already taking a worried look at their books, given that the number of high school students has been going down dramatically and fewer families think that college is worth the expense. One more crisis could force some colleges to throw in the towel

That said, the big public colleges are at all-time enrollment highs and the strong privates are expanding by gobbling up smaller colleges. So the FAFSA crisis may simply be amplifying normal market forces. 

UM: In 2020, Congress passed a law mandating a simplified FAFSA. The Education Department had three years to implement it. Wasn’t that enough time? Why did things get so bollixed up?

Nauer: Congress has repeatedly asked this question, with the Republicans arguing that the Biden administration was more focused on offering students debt relief and dropped the ball on the FAFSA. Education Department officials counter that they did not have enough time or money to pull this off given that everything about the FAFSA had to be rebuilt from scratch. Importantly, the FAFSA had to be integrated with the Internal Revenue Service systems, which house extremely sensitive information and require the use of strong security protocols. Both sides are probably correct on this one.

UM: To quote the great Yogi Berra, it’s tough to make predictions, especially about the future. But even so: Do you think the bugs have been worked out of FAFSA? Will it be smoother sailing when the aid application process for the 2025–26 college year starts in the fall?

Nauer: It has to be. How could be it worse? Federal Student Aid has done a lot of work on the FAFSA code over the last six months and will continue to refine the website. Some things will be better. 

However, there are still huge problems, most notably that the identity verification process we just talked about has not been fixed. Federal Student Aid’s own list of outstanding issues is long, and tech glitches continue to exasperate families who are looking for answers on Reddit/FAFSA and other social media sites. 

Most worrisome is the fact that the Education Department won’t commit to opening the FAFSA on time on October 1. Twenty-five national college access organizations and trade groups signed a letter to Education Secretary Miguel Cardona on June 10 expressing alarm at the department’s silence on how the FAFSA would be improved for the coming year and whether the form would open on time. A delayed release combined with the department’s vague communication, “would have disastrous impacts on students, counselors, and financial aid administrators,” the letter stated. 

There’s no doubt that this new FAFSA will be a vast improvement on the old form—once it’s working properly. But barring some kind of summer miracle, we should all expect another aggravating year.

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