The Financial Aid Debacle Affecting Millions of Low-Income Students

Spring is a heady season for high school seniors. Many universities require accepted prospective students to commit in early May; graduation typically occurs a few weeks later. This year, however, the excitement has been tempered by the botched rollout of the Free Application for Federal Student Aid, or FAFSA, which has left millions of soon-to-be high school graduates uncertain as to whether they can afford to kick off their college education.

At this point in a typical year, prospective college students would already know how much financial aid they are set to receive, making it possible for those nearing graduation to make important decisions about their future. However, this year was characterized by a delayed launch of the FAFSA, subsequent issues with the application system, and difficulties in processing student information. The situation has created a perfect storm of chaos for students and institutions alike, raising the prospect of a plummet in college enrollment even greater than the decrease seen during the height of the coronavirus pandemic.

“We’re worried that students are going to make a decision to go to college or not go to college absent information that they typically would have at this point in the process,” said Scott Del Rossi, a vice president at College Possible, an organization that helps low-income students apply to college. “Students are coming up against the unmovable deadlines of commitment dates and enrollment dates.”

Educators had long hoped for an updated version of the FAFSA, a form filled out by students that determines eligibility for financial aid—including all manner of grants, loans, work-study funds, and scholarships. Colleges and universities, as well as many states, rely on FAFSA to ascertain how much aid they will provide.

In 2020, it seemed that the dream of an improved form would be realized: Congress approved the FAFSA Simplification Act to revamp the application. The plan for a “better FAFSA” included cutting the number of questions on the form, adjusting the formula to calculate aid amount, and expanding eligibility for the federal Pell Grant, which provides assistance to students with exceptional financial need.

Although it was initially slated to roll out in the 2023-2024 school year, efforts to update the FAFSA quickly ran into difficulties. In 2021, the Department of Education asked for an additional year to implement the changes. Overhauling a decades-old system proved challenging for an agency overwhelmed by competing priorities, such as reopening schools in the wake of the pandemic and distributing funds provided by coronavirus relief legislation. The technical issues the agency faced were significant: The infrastructure underpinning FAFSA processing was written in a computer programming language called COBOL, which is archaic compared to modern systems. The writers of the FAFSA Simplification Act had not expected the Department of Education to undertake a complete technical overhaul, as former Senate staffer Blake McKibben told Inside Higher Ed.

The Biden administration has faulted Congress for not approving sufficient funds for the complicated update. Meanwhile, Republican lawmakers have pointed fingers at the White House for dedicating resources to efforts to forgive student loans, arguing that it distracted from the FAFSA rollout.

“They knew these deadlines for quite some time, but they were devoting so many resources to other things, that when the deadlines came upon them, they were ill-prepared,” said Senator Bill Cassidy, the Republican ranking member of the Committee on Health, Education, Labor and Pensions. Cassidy argued that if the Biden administration could find the funds to forgive student loans, then they could have done more to ensure a smooth rollout of the FAFSA form. “It suggests a certain duplicitousness. We don’t really know what they have, or what they’re willing to do,” Cassidy continued.

The Department of Education just barely slid under the deadline set by Congress to launch the form, making it available on December 30, 2023. However, the application did not become available on a 24/7 basis until early January. There have also been significant delays in processing student applications. Although colleges usually receive processed student application information at the end of January, the Department of Education announced that it would not begin transmitting this information until mid-March. Moreover, students who submitted paper FAFSA forms have not yet had their applications processed, according to MorraLee Keller, senior director for strategic programming at the National College Attainment Network. However, a spokesperson for the Department of Education said in a statement to The New Republic that more than 7.3 million applications had been delivered and processed as of April 12, and that processing had returned to “normal” timelines.

Last week, the agency disclosed that roughly 30 percent of applications submitted thus far could contain processing or data errors, pledging to send schools reprocessed forms by May 1. The Department of Education also said that around 16 percent of applications required student corrections, with the correction process set to become available this week—many of these errors occurring because of glitches in the application system. The agency had previously acknowledged in March that around 200,000 student records sent to colleges and universities had been miscalculated. The department spokesperson said that more than 100,000 student corrections have been processed since last week, with institutions able to receive corrected records within one to three days after submission.

“We recognize that while the new form is easier and simpler for many families, implementing this new system has brought certain challenges. The Department is putting all hands on deck to address challenges that have occurred and make sure schools, states, scholarship organizations, students and families are receiving regular updates on FAFSA implementation,” the spokesperson said.

Students encountering the FAFSA form have been thwarted by issues with the system, such as being unable to move to the next page of their form, said Del Rossi. He worried that these difficulties could result in low-income students and families internalizing the idea that any issues are their fault, and that they are not worthy of attending college. “This is just some version of confirmation for students and families, where they didn’t feel like they should be going to college, or college wasn’t meant for them,” Del Rossi said.

Recent research by NCAN shows that FAFSA form completions were down nearly 40 percent through the beginning of April, and only around 28 percent of seniors have completed the application. The drop has been particularly significant for schools with higher percentages of low-income students and students of color. The lower rate of FAFSA completions and submissions will likely result in a commensurate decrease in enrollment in colleges and universities in the fall.

This year’s setback is only going to compound the misfortunes of recent years. Keller said that students who did not enroll during 2020 and 2021 due to the pandemic did not return to apply to college later on, a concerning precedent for the current lackluster FAFSA submission and completion numbers. While college enrollment has increased in recent years, it has not rebounded to pre-pandemic levels.

“We haven’t gotten back to the enrollment rates where we were pre-Covid. So if this hit this fall is even worse, the long-term effects are going to be less students enrolled in college, less students obtaining any kind of credential or degree, right, which is going to have perhaps effects on the workforce or being able to find qualified workers,” said Keller.

The difficulties with the FAFSA rollout are hurting the students the program is most intended to help, namely those from poor households who might be the first in their families to attend college. “All of this was aimed at making it easier for low-income, first-generation kids to afford college, and the irony is that the reverse is happening. It’s discouraging them from applying for college. It’s making it feel like college isn’t for them,” said Ed Mitchell, president of the American Council on Education, which represents more than 1,700 colleges and universities.

Because of the delay in processing FAFSA forms, several institutions have pushed back their deadline for students to decide if they will attend. However, that is easier for a massive university system like the University of California or the State University of New York than it is for smaller, independent colleges, said Mitchell. A decrease in enrollment one year could threaten that college’s ability to stay open. “I think it’s going to put many small, independent institutions on notice in a really dramatic way,” said Mitchell.

Testifying before a House Appropriations subcommittee last week, Education Secretary Miguel Cardona insisted that correcting the issues with the FAFSA rollout was a priority. “There’s nothing more important to the Department of Education. We’re working on this around the clock because we want to make sure our students have the information they need to make informed decisions,” Cardona said, adding that he did “empathize with the challenges and frustrations that folks are feeling.”

Republican lawmakers, however, do not believe that this empathy is sufficient. Cassidy was among a group of GOP lawmakers who requested the Government Accountability Office open its investigation into the FAFSA rollout, and has launched a hotline for students and families to report issues with the application. “If they don’t get their feces together really fast, this is going to be a total mess,” Cassidy said. “Ultimately, this is on Secretary Cardona. This is a fundamental function of the Department of Education, and they have failed.”

However, some Democrats have pointed fingers at General Dynamics, the military contractor tasked with updating FAFSA. Last week, Senators Ron Wyden and Elizabeth Warren sent a letter to the CEO of General Dynamics requesting information on the “bungled launch” of the FAFSA. “It now appears that your efforts to date have been a near-total failure and that the FAFSA problems caused by this failure are harming millions of students and hundreds of colleges,” the senators wrote.

The effects of this rollout will be far-reaching and damaging in the long term. The low-income students now struggling to complete or submit their FAFSA forms may view these difficulties as another failure by the federal government at a time when trust in institutions is at an historic low, particularly among young people. Teenagers who entered ninth grade in 2020 have had their high school experience defined by a devastating pandemic and, now, a seeming inability by the federal government to offer sufficient aid.

“In a way, that was their first direct engagement with the federal government. And so at a time when all institutions are being held up for some ridicule, we’re now saying to a bunch of high school seniors, ‘By the way, the federal government doesn’t work,’” Mitchell said. “I’m not sure that that’s a lesson that I want future voters to have about democracy and the government.”

However, despite the ongoing complications, Keller urged students and families against despair. “Please keep attempting to get your FAFSA done, so you can get your aid offers, so you can make a choice about your path after high school,” Keller said. “Please don’t give up.”