FAFSA: Friend or foe?

Key points:

• Federal financial aid is crucial in making higher education accessible and affordable in the United States
• Gen Z students worry about AI, student debt, and careers
• AI, edtech can improve equity in college admissions
• For more on enrollment and finances, visit eCN’s Campus Leadership hub

Imagine you’re an 18-year-old who just graduated from high school. It’s a time to celebrate your accomplishments and begin to prepare for the next journey into adulthood. Attending college is part of that journey for many students, and normally those choosing to attend college would know where they are attending. But not this year. 

Why is this year different? Because of the delayed and challenged implementation of the FAFSA Simplification Act (FSA). Federal financial aid is crucial in making higher education accessible and affordable in the United States. The failure to effectively implement changes to the federal financial aid system has already strained schools. More importantly, it will prevent students–most likely low-income students–from attending college this fall.

Understanding what went wrong this spring is essential not only for addressing the financial aid and enrollment crisis for the upcoming school year but also for reimagining how the U.S. financial aid system could and should evolve in the future.

A simplified process not so simple

In 2023, the U.S. Department of Education aimed to simplify the FAFSA form to expand access and ease of use. The FAFSA, which stands for Free Application for Federal Student Aid, is essential for students seeking federal student loans and grants. Additionally, it is the primary form that triggers the financial aid process, including scholarships, at most U.S. higher education institutions.

Significant changes included:

• Simplifying the FAFSA Form
• Replacing the Expected Family Contribution (EFC) with the Student Aid Index (SAI)
• Modifications to Family Definitions in FAFSA Formulas
• Expanding Access to Federal Pell Grants

The changes to the FAFSA were scheduled to launch on October 1, 2023. However, the complexity of the overhaul delayed the implementation until December 30, 2023–well into college application season–leading to a cascade of challenges:

1. The Department of Education faced challenges in promptly processing the new FAFSA form data, resulting in calculation errors and major delays. About 30 percent of submitted FAFSAs–or roughly 2.1 million forms–were affected by data or processing errors, the Department of Education reported on April 9. See graphic below, which depicts where the processing delays occurred in steps 3 and 4.
2. The form’s complexity caused confusion for students and families, requiring additional time for error correction post-submission. This disproportionately affected low-income communities, which has experienced a notable 20 percent decrease in FAFSA completions as of May 10.
3. Institutions were unable to provide award information to students in time for May enrollment deadlines, resulting in many institutions pushing back commitment deadlines. Furthermore, rectifying errors in aid distribution was delayed until later in June.
4. Students lacked clarity regarding their eligibility for aid, hindering their ability to make well-informed enrollment decisions.
5. Institutions encountered difficulties in grant applications, risking the loss of funding for impactful student-focused programs and initiatives.

The delayed and error-ridden process not only affected students and their families but it also had broader ramifications for colleges and universities.

Due to launch errors, the Department of Education was unable to send Institutional Student Information Records (ISIRs) to colleges and universities for financial aid processing until mid-March. ISIR data, crucial for determining aid eligibility and crafting award packages, also plays a pivotal role in institutions’ federal funding applications. Institutions rely on federal grants to support operations and historically marginalized groups. These grants, including Title V and Title III, average $450K-$600K per year for institutions to support students with key expenses such as tuition, food, and housing.

Accurate FAFSA data is essential for institutions to plan effectively, yet recent errors have disrupted this process, making it challenging to project student demographics accurately.

Reimagining what’s possible: A mix of tactical and transformative

The challenged launch of the FAFSA Simplification Act has highlighted broader challenges to our current financial aid system, which will continue to affect the system unless we advocate for change.

Spending our time trying to help institutions navigate the financial aid process has given us a picture of what a truly reimagined and reinvented financial aid process would look like.

In a reimagined financial aid process, technology would streamline operations, improve accessibility, and enhance transparency. Institutions and the Department of Education would leverage automation and data analytics to tailor aid packages and provide real-time support to students.

We encourage the ED to consider the following tactical next steps to accelerate FAFSA completion:

• Automate: Minimize the need for students and families to enter existing information into the FAFSA form and have it automatically populated from sources like tax data; remove as many manual steps as possible.
• Simplify questions: Use fewer, clearer questions in plain language, and employ chatbots to help guide applicants.
• Streamline regulatory updates: Update the ISIR data format to enable institutions and vendors to promptly recognize and integrate regulatory updates, thereby saving time and resources.
• Partner with software providers: Incorporate diverse perspectives and expertise into the FAFSA development process and provide test environments to vendors, enabling them to anticipate and rectify form or data errors and connect the data collection to the award process at universities.
• Incorporate feedback: Establish clear mechanisms to gather input from students, parents, and financial aid professionals, and address challenges promptly.

Thinking beyond technical reforms, we encourage the Department of Education, institutions, and technology partners to strive for greater access to financial aid by:

• Prioritizing financial aid offices: Financial aid offices are often overlooked in strategic decision-making. We encourage presidents and other decisions makers to prioritize financial aid services and programs. The College Cost Transparency Initiative provides a framework on how to implement best practices at your institution.
• Focus on student experience & training: Create and promote additional financial aid training, both about financial aspects of taken on deck as well as the actual financial aid process; target first-generation students in particular and partner with K-12 organizations to aid FAFSA completion.

These changes would improve access and equity in terms of attending college. We strongly believe that education is the key to successful career outcomes, expanding education is what we should all be striving for. We invite everyone involved in the federal financial aid process to think radically in hopes of making our imagined future a reality.

About the Author:

Mike Wulff is Chief Product and Technology Officer at Ellucian, leads engineering and product management teams, driving digital transformation and cloud adoption initiatives. With over 25 years in the software industry, he leverages his foundational experience as a developer and technology leader to drive successful product releases from inception through deployment.

Jeff Dinski is Chief Strategy and Corporate Development Officer at Ellucian, drives growth strategy focusing on market expansion, corporate development, market intelligence, and global partnerships. With over 20 years of experience in education technology and media, Jeff has delivered results for both large conglomerates and startups, previously serving as a partner at Tyton Partners and holding leadership roles at Parchment, Comcast, and ESPN.