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Crunch Time For The FAFSA Rollout

Crunch Time For The FAFSA Rollout

May 10, 2024

By Jeremy Hus, Vice-President of Financial Planning | Barnum Financial Group

The Free Application for Federal Student Aid (FAFSA) is the means by which students obtain their fair share of the billions of dollars in Federal, state, and college financial aid to help defray the cost of college. The problems affecting the current admissions cycle began when the 2024-25 FAFSA was late. It wasn’t available from the Department of Education (ED) until December 31, whereas the FAFSA’s usual availability date is October 1.

In a normal year, the ED sends a financial aid eligibility report to the colleges designated by a student within days of receiving his or her FAFSA. This usually occurs in October or November because students are motivated to submit the form soon after it becomes available.  The report, called an Institutional Student Information Record (ISIR), allows colleges to award Federal and state aid along with their own financial aid. They then can send Award Letters to admittees with all pertinent financial aid information.

This year, the ED’s revision of the FAFSA, as mandated by Congress in the FAFSA Simplification Act of 2020(the Act), has caused delay in the sending of ISIR’s to colleges, which in turn delays their ability to prepare Award Letters. Award Letters are usually sent out by colleges in March or April, giving students adequate time prior to college enrollment deadlines to choose which school to attend from among those that admitted them.

A student’s choice of a college often depends heavily on the amount of financial aid he or she will receive. But applicants will not have net cost information when it’s most needed — in time to identify their best-fit college. The dilemma confronting families is due solely to the delay-ridden and problematic rollout of the simplified FAFSA by the ED.

Initial Problems with the Rollout

The trouble began when the ED announced last July that the FAFSA wouldn’t be online until December. In fact, it didn’t go live until December 31, one day before the final deadline set by Congress in the Act. It was taken offline less than an hour later. By the second week of January, the FAFSA was available 24/7, but its problems were far from over. Some students and parents were randomly locked out of the FAFSA. Because of a technical glitch, many students born in the year 2000 couldn’t submit a form. Parents who didn’t have a Social Security number couldn’t fill out their part of the form. The ED reported long waits for its helpline, which was bogged down with call volume.

On January 30, the day before it was scheduled to start transmitting ISIR’s to colleges, the ED announced that most ISIR’s wouldn’t go out until mid-March. The ED needed time to change its aid formula to account for inflation, which was required under the Act but which hadn’t been included in the project. This failure would have caused $2 billion in aid to go unawarded to eligible students., so it needed to be fixed promptly.

At this time, (mid-April), most students are able to fill out and submit a FAFSA, but the overall situation remains critical. The ED has processed more than 4 million FAFSA’s, but 2 million ISIR’s are yet to be sent out. Although many colleges have received ISIR’s, enabling them to prepare Award Letters, new problems keep occurring. For example, many schools are reporting much higher error rates in ISIR’s than usual. The ED has stated that students won’t be able to correct these errors until late April.

A New Problem

The ED recently announced that a calculation error by the EDled to inaccurate aid information on about 200,000 ISIR’s sent to colleges earlier this year. The ED has acknowledged that, “The FAFSA Processing System was not including all data fields needed to correctly calculate the Student Aid Index for dependent students who reported assets. This issue resulted in inaccurate ISIRs for dependent students with assets being delivered to colleges prior to March 21, 2024.” All of the affected ISIR’s will need to be reprocessed by the ED and re-sent to colleges, delaying Award Letters for affected students even further.

To make up for this lost time, the ED has recommended that colleges recalculate affected Student Aid Indexes (SAI’s) manually and then send students estimates of the net cost to attend their college. This is a nearly impossible task for college financial aid offices , which are already coping with a large backlog of ISIR’s and a surge of questions from confused parents. Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators commented that “Schools can only work with valid and correct data that is provided to them from the U.S. Department of Education. It is not feasible or realistic to send out incorrect FAFSA data and ask thousands of schools to make real-time calculations and adjustments to the Federal formula on the school side.”

The slow pace of ISIR delivery, combined with ISIR incompatibility with college in-house systems, has severely impeded the admissions process this year. This has hobbled colleges racing to get accurate information to admittees in advance of enrollment deadlines.

An Even Newer Problem

The ED acknowledged on March 29 that it is aware of issues reported by college financial aid offices concerning tax data reported on ISIR’s. The ED has stated that these potential problems, “would not affect the significant majority of all previously submitted applications.”

The ED is working with the IRS to assess whether the problem is adversely impacting a large subset of FAFSA applicants and if there are system issues involved. The ED stated that “In collaboration with the IRS, we will determine the scope, impact, and remedy for any potential issues identified. We will keep the financial aid community informed of the status related to these reports and provide states, schools, and other stakeholders with any further guidance as quickly as possible once we have more information.”

The Impact of FAFSA’s Problems 

At this time last year, nearly 9 million 2023–24 FAFSA forms were submitted. On average, approximately 17 million FAFSA forms are submitted each FAFSA cycle. The number of students completing the FAFSA this year is down significantly compared to previous years. According to data from the National College Attainment Network (NCAN), as of March 15, only 32% of the high school graduating class of 2024 had submitted a FAFSA, a decline of 30% from the same time last year. The data reveal that about 600,000 expected applicants have not yet submitted a FAFSA. Even if all colleges extend their enrollment deadlines to June 1 and the ED processes its FAFSA backlog quickly, NCAN forecasts nearly 3 million fewer FAFSA-filers this year than last year.

Observers are skeptical that all or even most of the missing students will fill out the FAFSA in time to start college this fall, although there’s still plenty of time to file. A major concern is that many high-school seniors haven’t even applied for Federal student aid. After all, not all high school graduates are determined to attend college. Many are weighing whether to continue their education or take a job. They may be more inclined toward the immediate benefits of a job if they don’t know the real net cost of college.

Long term, most educators think that new FAFSA will be better than the old one. Low-income students will get more aid and more students will be eligible for grants. Some feel  it might even be worth the crush of problems this year, but it will come at the cost of a college education for many of the members of the high school class of 2024. 

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An indication of the severity of the FAFSA crisis is the survey of students being conducted by the New York Times (April 3 edition). The introduction includes the following statement:

“Applying for financial aid was supposed to get easier with the new version of the Free Application for Federal Student Aid, which millions of families and thousands of schools rely on to determine how students will pay for college in America. But for months, they have had to navigate a bureaucratic mess caused by severe delays and glitches with the new application. As colleges and universities start to release their admissions decisions, many students are in limbo, waiting to hear how much financial aid they will receive before committing to a school. We want to hear from readers about how issues with the new FAFSA system have shaped their decisions around attending college.”

Below are the key questions that are being asked of students who expect to graduate from high school this spring:

  • Are you considering or going to a school that is not your top choice because of uncertainties around your financial situation?
  • Are you altogether rethinking going to college?
  • What changes have you had to make as you await your financial aid package?

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