How will the FAFSA debacle impact colleges and universities this fall?

Over the past year the United States federal government has been revising its FAFSA (Free Application for Federal Student Aid) system.  Unfortunately, its rollout over the past few months has been chaotic.  Delays, errors, more delays, having to redo applications, and other problems have beset the effort.

My question today is, how will FAFSA problems impact student enrollment this fall semester?

“a rolling catastrophe,” according to Ted Mitchell of ACE

Naturally DALL-E had a hard time spelling the name.

To quickly summarize: the key problem is that financial aid information is working its way through a complex system whose well-intentioned redesign is far behind schedule.  A good number of students, especially poorer ones, can’t commit to a college without getting aid awards.  Similarly, currently enrolled students might not know their financial aid supply for the upcoming year.  Remember than, ironically, Congress launched the current FAFSA iteration to be easier to use.

As a result, the number of completed FAFSA forms from high school students is down 27.1% compared to last year, according to the National College Attainment Network (NCAN).  The Department of Education advised states to delay budgeting their financial aid funds, given the system’s slowdown.

For more information, I recommend Liz Willen’s typically sharp article at Hechinger, Rose Horowitch’s Atlantic column, this New York Times overview, or this PBS short video:

What might this debacle mean?

First, there’s the human cost of growing stress, added to a population already historically burdened with mental health issues.  One source of that stress is the possibility of missing college. Along with this is the pressure suffered by campus financial aid staff, along with staff and faculty who work in advising.

Next, what happens to enrollment?  That is, how many students with choose not to attend college this year as a result?  This is a question of time, as Horowitch observes:

[E]ven if schools change their deadlines and the department gets through its FAFSA backlog, that still leaves 2.6 million fewer students who have submitted applications compared with this time last year. Education experts are skeptical that all or even most of them will fill out the FAFSA in time to start college this fall, although technically there’s still time. The biggest worry is the 600,000 high-school seniors who have never applied for aid before. Kevin Carey, Laitinen’s colleague at New America, points out that most young people aren’t on a fixed path to college. They’re weighing whether to go to school or take a job. “If you don’t even know what the cost is in your cost-benefit analysis, you just go with the benefit” of getting a job, Carey told me.

Some number of students may decide to put off college for a year.  Remember that the labor market beckons, sweetened by the excellent 3.8% unemployment rate.

Third, how many institutions will suffer financially as a result?  Fitch Ratings called this problem last month:

The U.S. Department of Education (DOE)’s delayed processing of Free Application for Federal Student Aid (FAFSA) data for the fall 2024 enrollment cycle is the latest blow to colleges that rely heavily on low-income and minority enrollment. The delay is forcing most colleges to postpone sending financial aid packages to students until late March or April at the earliest. This puts colleges at risk of losing admitted students to competitors with lower sticker prices or to colleges that can afford to commit financial aid or merit funds to students before knowing FAFSA results.

Additionally,

In turn, deposit rates are down as some students postpone college decisions pending receipt of their aid offers, while some may consider foregoing college altogether. For colleges that are almost solely dependent on student-generated revenues, this enrollment uncertainty is wreaking havoc on their already tight budget planning for the upcoming fiscal year.

Again, it’s the logic of modern American higher education, which depends fundamentally on student fees to sustain itself.  Fewer incoming students pressures that system.

Yet perhaps this will fizzle.  I haven’t said enough good words about the hard-working Department of Education staff, who’ve been striving mightily – and arguably without sufficient resources – to fix FAFSA.  The percentage of students who haven’t returned the form has been declining incrementally over the past few weeks.  Maybe we’ll see a last-minute flood of forms as the system corrects.

Looking further out, I want to add some more thoughts.

Start with what a mess this FAFSA update has been.  It’s not a good look for academic institutions trying to build trust and belonging with students. Moreover, it’s a real problem for the Biden administration, especially as it has made expanding government operations a keystone of its record.  It’s harder to make the case to increased public services when one of those services is badly botched.

Unfortunately, we should anticipate this becoming an election issue.  It’s easy to see Republicans attacking Democrats for incompetence. We could also see the FAFSA story as a stick with which to beat higher education as a whole.  Think of the arguments and memes.  “Democrats can’t even get paperwork right!” “Universities lock students into lifetimes of soul-crushing debt and somehow manage to mangle the process!”  “Pointy-headed bureaucrats in government/college can’t get basic jobs done!”

Moving on to enrollment: after more than a decade of decline, student numbers actually ticked up 1% last fall (2023). I know a lot of people are invested in an enrollment rebound. Might the FAFSA story quash that reality?  And, if enrollment ticks down, will many  blame the form fiasco rather than other forces?

Right now I wouldn’t be surprised to see total US post-secondary enrollment down 1-2% in fall 2024.

My heart goes out to the students and their families, trying to work through this.  And my sympathies for every professional working in financial aid, trying to right this wreck.

What are you seeing of FAFSA in your world?  What’s your estimate of its impact?