FAFSA Fiasco 2.0?

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Last month we shared a FAFSA timeline and argued that the Department of Education (ED) problems with the launch of the new simplified FAFSA started much earlier than this year’s media firestorm. At least back to mid-2021 and likely even earlier. Even though some individual states are doing well in making up for lost ground in terms of completed applications, it still looks like the problems with this year’s FAFSA will influence enrollment at least as much as what we saw with Covid. But will the FAFSA fiasco have a multi-year impact?

Obviously we don’t yet know, but there are signs that indicate that next year’s FAFSA (i.e., for the 2025-2026 academic year) will be affected, and the form will likely be delayed.

Where we are now

As of May 10th FAFSA completions for high school students is still 17.2% below where it was last year. Note, however, that the story is more complex than one metric can capture.

• Students from lower-income districts have a larger completion gap of 20.1% compared to 15.8% for higher-income districts. That same difference (20.1% to 15.7%, with rounding errors) applies to high-minority and low-minority districts.

• The data only apply to high school students age 19 or younger submitting the FAFSA for the first time. We don’t know about rates for people who are not in high school.

• Rates vary markedly within and between states, from a high of 25.0% below last year for Mississippi to a low of 3.8% below last year for Indiana. Within states there are also variations between different counties or regions and different types of schools.

What is clear is that there will be an impact on enrollment.

How did we get here?

By March it was clear that there were going to be big problems with FAFSA completions, but as we pointed out in early April, the problems had been clear for some time. A key point that triggered concern for many people was when ED would not commit to making the final form available by the usual October 1st deadline. This information instead was leaked out in dribs and drabs: first in late November 2022 when, during a FSA training exercise, ED officials were vague about the date, and documentation from that event essentially precluded an on-time release.

This information was corroborated in early February 2023 when an ED official at a NAFSAA event said that the form would not be available by October but instead in the fourth quarter of 2023. The release of the form eventually happened on December 30th but in the form of a “soft launch”, which translated to the form and associated websites being available for about an hour a day for the first week and a half.

Since then, there have been multiple technical glitches and problems in addressing errors in data and calculations. Leading to the point where we find ourselves today, with the a major gap in FAFSA completions. And we are still blind on the size of that gap for non-high school students.

What about next year?

The completion gap is improving by 3-4% weekly (which will likely change as students graduate), but we still have to consider what the situation will look like next year.

In an appearance before the Senate Labor, Health and Human Services, Education, and Related Agencies appropriations subcommittee on April 30th, Education Secretary Miguel Cardona said it is ED’s expectation that it will launch the 2025-26 FAFSA on October 1, 2024. However, the draft form is already late - that is typically released in February and is nowhere to be seen.

Many in the financial aid community are doubtful that ED will be able to make the October 1st deadline and fear that this will set in motion a cascading series of delays much like this year. Additionally, some observers are worried that the compressed time frame and the pressure of public opinion will mean that ED will not make some of the smaller changes that should be made before next year (many identified by external organizations) and will forego public commentary on the draft form.

One such observer, Karen McCarthy (vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators), stated her concern at a panel hosted by the American Enterprise Institute.

On the same panel, Mark Kantrowitz, president of Cerebly (a financial aid consulting firm), added the additional point about comments.

On May 7th, leaders of both parties from the Senate Committee on Health Education Labor and Pensions wrote to education secretary Miguel Cardona urging him to make sure the same kinds of problems that happened this year don’t happen again for the 2025-2026 cycle.

The congressional leaders asked for weekly updates on the timeline, consumer testing, and bug fixes by the first week in June. They further asked ED to provide a list of current errors or issues that require resolution by July 8th, 2024. They further requested that a beta version of the form be made available to them no later than September 9th, 2024.

The heightened level of scrutiny by Congress is a change from what happened last year when legislators in both Chambers either ignored or didn’t act on the warning signs until it was clear that problems were severe. As an example of the available information, the GAO report from June 2023 on the modernization project made clear that there were serious problems with how FSA and ED were managing cost and timelines.

Even more tellingly, while FSA did create a schedule for the modernization, they did not:

As a result, the GAO found that the reliability of the schedule was limited. The schedule as presented in the GAO report is optimistic, and it is clear why the problems encountered over the past six months set off a cascade of missed deadlines.

While Richard Cordray concurred with the recommendations of the GAO report and said that FSA would improve the quality assurance of the schedule, from subsequent events, it would not appear that progress has been made on that front. To this day. For example, the allowance for students with parents or guardians who lack a social security number to be able to complete the form was based on a temporary fix, not a resolution of the underlying processing errors.

We are dealing with a pattern of behavior.

Parting thoughts

It will be interesting to see whether heightened scrutiny by Congress and the public will have an impact on true resolution of the FAFSA fiasco, and if next year’s cycle will be far less problematic. A second year of additional enrollment challenges will likely be more than many schools can handle. The first real indicator we should see will be after the first week in June, when ED needs to make its first report on next years FAFSA to Congress. We will be watching closely.

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