Related Links

• The FAFSA Crisis: Will Delayed Completions Result in Enrollment Declines?
• June Update: The 2024 FAFSA Crisis
• Community College Insights blog

Transcript

Tim Sablik: My guests today are Stephanie Norris and Laura Ulrich. Stephanie is a senior research analyst and Laura is a senior regional economist, both at the Richmond Fed. Thank you both for joining me.

Stephanie Norris: Thanks for having us.

Laura Ullrich: Thanks for having us, Tim.

Sablik: Today we're going to be discussing a couple of recent posts that you've written on our Community College Insights blog related to the Free Application for Federal Student Aid, or FAFSA.

Students applying to college and hoping to receive federal financial aid through the Department of Education need to fill out the FAFSA form. Colleges and universities also use this information to determine financial aid offers. Unsurprisingly, financial aid plays a big part in the enrollment decisions of students, so looking at the completion of FAFSA forms by graduating high school seniors can provide a sort of leading indicator of incoming college freshman enrollment in the fall.

Laura, what did you find when you looked at the FAFSA data in April?

Ullrich: There's a new FAFSA form. It's supposed to be simplified. The goal of it was to make this easier and to expand availability of federal financial aid to more people.

But it did not come out in October as it normally does. The normal calendar is that the FAFSA opens October 1. That didn't happen. There was a lot of press about the fact that it didn't happen, so we already were kind of looking at it a bit.

But the National College Attainment Network has a FAFSA Tracker that they've done for several years, and they came out at the end of March with some data showing that year-over-year FAFSA completions were down almost 40 percent. This is really when Stephanie and I went from — I think she would agree — saying we were interested in it to where we were, all of a sudden, very concerned about what was going on with the FAFSA. That's why we originally wrote our piece in April — to alert people to the fact that FAFSA applications were down.

Sablik: So, what could be behind the decline in FAFSA completions?

Ullrich: The implementation of this form was delayed. Also, there were a bunch of errors in the form, so even people who tried to submit the form once it came out had issues with completion. For a period of time, you couldn't even go in to fix the errors.

But I don't think that's the only thing that's going on. I think this rough introduction to the new FAFSA form happen to collide with a couple of other things that are also going on in higher ed.

The first is something that we've been seeing for the past few years, which is people are really questioning the return on investment to a college education. I think all the talk about student loan balances [and] student loan forgiveness has made young consumers of education even more aware of the issues around the cost of higher education. We've been seeing every year the percentage of high school seniors that are graduating from high school and then enrolling in college the next fall. That number has been going down pretty steadily year over year.

We would be remiss if we overlooked this group that graduated high school in 2024. They had an interrupted eighth-grade year because of COVID during the 2019-2020 school year, and then their freshman year of high school is the year that many students across the country either spent in a fully virtual environment or a hybrid environment where they were just in school a few days a week. It's my belief that this group of seniors might also have been uniquely sensitive to a disruption.

Sablik: How did colleges and universities then respond to these challenges with the FAFSA process?

Norris: Schools started to get concerned with the delayed FAFSA form initially. But then, like Laura mentioned, when we started to see these national numbers — a 40 percent decline — I think there was a raised sense of urgency.

Early in the year, the federal government saw that this was happening, so the Department of Education made resources available. They deployed financial aid experts to mitigate some of the issues with the delays [and] the errors and the problems that people were having filling out the forms.

But for schools themselves, there [wasn't] a ton that they could do initially. These are incoming freshmen, so they're not at the institutions.

Typically, four-year institutions have deadlines by which you have to enroll for fall. You get your offer of acceptance, you get your financial aid packages, and then you make a decision of where you are going to college. Because of the delays in the FAFSA, a lot of students were getting worried that they wouldn't have that information by the time they had to make those decisions. So, there were a couple schools, more than a couple, that pushed the deadlines for students to try to give students a little bit more breathing room [and] give the institutions more time to get that financial aid data from the Department of Ed, from the FAFSA processing system, and deploy the financial aid offers.

Ullrich: The typical financial aid situation with colleges is that May 1 is decision day. So, if you're going to go to a college, you need to tell them by May 1 that you're coming [and] put your deposit down. That's what guarantees you entrance into their freshman class, housing, etc. Pretty quickly, there were some schools that were saying we're going to delay this until May 15 or June 1.

But as you can imagine, not every college had to do this. There are some colleges where their student body is not especially sensitive to federal financial aid, where a high percentage of their students can afford to pay for it without utilizing the federal financial aid system and they don't have a high percentage of Pell Grant students. But you can imagine that there are many other institutions that rely very heavily on this.

As one financial aid professional pointed out to me, we can't delay the start of school. So, what this did was just shorten the period of time that they could get students acclimated to going into college this fall, and get them into orientation sessions and all this stuff that typically happens during the summer season. This has been an especially stressful time for financial aid admission offices across the country.

Norris: In addition to the schools, the FAFSA is used by other organizations to award aid. There's a lot of state scholarships, tuition waivers, and foundations or nonprofits offering scholarships. All of those require students to fill out the FAFSA and to have that process before they determine scholarship and award amounts. Some of those deadlines also didn't change so, again, if you're thinking from a student's perspective about the full financial aid package you're looking for, you need that information to make a decision. If May 1 is the drop-dead deadline for that, it's going to be difficult to make a decision that you feel comfortable with.

There were a lot of organizations — student advocacy, higher education advocacy organizations — that also saw this and started their own campaigns and support, both in high schools and at colleges. There are also some colleges that took it upon themselves to create interesting incentive programs.

I had shared this with Laura last week. I saw a college in Tennessee hosting an on-campus FAFSA event for incoming students. This was in June. The students could fill out the FAFSA form. They could get a quick estimate of their aid based on what they filled out, and then they could make a decision on the spot. Even if when the FAFSA goes through the actual process and you get less money, the school would honor the higher amount. So, if they overestimate what they would give you, the school will make up the difference.

Sablik: Yeah, that is really interesting.

As we got closer to some of those deadlines, some schools were responding by extending deadlines. Other groups were responding in other ways. You wrote another piece updating the situation in June. Did you see an uptick in FAFSA completions since the spring when you looked at it again this summer?

Ullrich: The short answer is yes, which is great because we weren't sure. When we first started doing this work, we figured there would be a catch-up effect. There would be many more students completing [the form] in April and May than would typically complete in April or May because those folks maybe would have done it in October [or] November in a typical year.

So, there was a catch-up effect. That's the good news. The bad news, though, is as of June 7, [FAFSA completions] was still down 12.8 percent. As of June 21, new data is out now since I wrote that piece — it's still down 11.8 percent. ... There's been a tapering off of this catch-up effect.

If you think about these high school seniors, once they leave high school, they leave that support network that might be encouraging them to complete the form — their college counselors or teachers, whoever that might be reminding them about this pretty consistently. So, there was a catch-up effect. But we're still well below where we normally would be this time of year.

It does differ by state. There are some states where it is more severe than other states. In the Fifth District, for example, West Virginia has seen one of the larger declines compared to last year. It's still down 18.6 percent, which is the second lowest in the country. Alabama is the lowest. So, 18.6 percent fewer seniors have completed the FAFSA this year compared to last year, and that's after adjusting for class size and things like that. Obviously, that is very, very concerning.

On the positive side, Virginia is down just 10 percent, which is below the national average of 11.8 [percent] right now. The other Fifth District states are right at the national average or below, so we're still seeing more than double digit declines compared to last year.

I'll also state that one of the other things that we wrote about in both our pieces in April and June, and this isn't surprising but it's definitely worth pointing out, [is] the schools with more economically disadvantaged students have larger declines. For example, we looked at Henrico County Schools in Virginia and Highland Springs High School, which has the highest percentage of disadvantaged students. Only 39 percent of their students have filled out the FAFSA this year. But at Deep Run High School, which has the lowest percentage of economically disadvantaged students, 58 percent of their students have filled it out. So, there is certainly a relationship here between income and the propensity to fill out the FAFSA, even though the more economically disadvantaged students are the ones who really could benefit the most from the dollars that flow from the FAFSA.

Norris: One of the things that we noticed was that when we look at Henrico, the gap between 2023 and 2024 completions in April, it wasn't that different between the highest and the lowest income schools. The issues with the FAFSA this year are transcending income. Students and their families at high-income, high-socioeconomic status schools are struggling with getting the FAFSA done, too. But, like Laura was saying, it's so much more important at these lower-income schools because this is really going to be the only pathway for these students to higher education, whereas some students at the higher-income schools could have other options.

Sablik: As you mentioned, there was this uptick in recent months in the summer. But we're still, on average, below the rates that we saw in 2023. Assuming that the FAFSA completion rates for 2024 end up coming in lower than last year, what does that mean for colleges and universities?

Ullrich: We don't really know, but it's not good. That is, I think, what we know for sure.

Just to give you an idea, typically, as I mentioned, the FAFSA is a really good predictor of college enrollment. If the percentage of folks filling out the FAFSA is going up, enrollment goes up. If it's going down, the opposite happens.

If you look at fall 2020 and fall 2021 where we saw enrollment declines because of what was going on with COVID, enrollment fell in both years by a larger percentage than FAFSA completions declined. For example, in 2021 completions declined by 1.22 percent. By the end of June, enrollment declined by more than 2 percent. If you look at the decline between 2019 and 2021, and I'm looking at as of the end of June, you'll see FAFSA completions over that two-year period were down about 3.6 percent, yet college enrollment, overall higher ed enrollment, declined by 4.7 percent.

As of June 21 this year, as I mentioned, FAFSA is still down 11.8 percent year over year. Does this mean that we could see double-digit enrollment declines this fall? The answer to that is possibly. There's still this hope that between now and August there is this catch-up that we don't normally see, or that enrollment shifts to community colleges and other institutions that don't have the same types of FAFSA and enrollment deadlines that a lot of four-year schools have.

This is going to hit different schools very differently. If you think about elite private schools and very good public flagship universities, these schools have a very deep waitlist. They have tons of applicants, right, very low admission rates. They are going to be just fine because what might happen is they might have to go deeper into their waitlist this year, but they're still going to be able to fill the freshman class they want to fill, for the most part. But regional public universities and smaller, tuition-dependent private schools, these are the schools that are really at risk because they don't have long waitlists. They already let in a high percentage of the students who apply, and now they've got to figure out how to fill that freshman class.

Norris: Community colleges are in an interesting spot because they do tend to serve a large share of lower-income students. These are students who would be dependent on getting federal aid, including the Pell Grant. However, community colleges are also the lowest-cost option around irrespective of federal aid for a lot of students. Say there were issues with someone's FAFSA. They just didn't get to it. They come up to fall and they say, "Hey, I'm not doing anything. Maybe I should go to college." Community colleges are going to be the best option.

There's also potential for students who thought they would be attending a four-year institution in the fall that end up opting for a community college because they didn't get their financial packages in time, they couldn't make a decision. Their out-of-pocket for fall is going to be higher than they were expecting. Community college becomes a more attractive option, even if there is the intention to transfer.

Ullrich: I think we both are predicting that community colleges overall might see a bump up. This goes along with what I was talking about before — community college was already seeing some momentum from the shift away from bachelor's degree and even associate degree attainment and towards shorter-term certificates and other shorter-term credentials that will help them on top of the fact that we've talked to several community college leaders that say, "Hey, somebody shows up day one of college this fall and wants to register, they can fill out the FAFSA that day." They'll wait for that money to come in, and then they'll be able to serve that student right away. That looks very different than what it looks like at a lot of four-year institutions.

Sablik: Another thing you note in the articles you wrote is that many community college students are not recent high school graduates. Do we know anything about FAFSA completion rates for older students?

Ullrich: I wish we had those data. We do not have those data. The data that are available are for the seniors.

However, probably about three months ago now, we did get a peek at the over-age-25 data for one of our Fifth District states. They had that data internally. The reduction in FAFSA completions was actually larger for that group than it was the high school seniors. That makes sense because, if you think about the high school seniors, they do have this support network of professionals that were trying to encourage them to fill this thing out. And, like Stephanie said, there are some schools that were doing very targeted programs. There were nonprofits doing programs. A lot of local community colleges were having FAFSA days. But how do you find these people over age 25 that are thinking about going back or even age 21, 22?

Sablik: Looking into the long run — I know researchers love forecasting about the future — how might all of these changes impact the high school seniors who are graduating this year?

Norris: That's the big question, and I think that's where a lot of my concern is, too. That summer between high school and that start of college is a transitional period for a lot of kids. After graduating high school, for the first time in your life you're without an institution, without that framework. If you don't transition efficiently into your next step, it is really hard to get back on that path. They could be in education and they could be in the workforce.

Ullrich: Yeah, I think that's a really, really good point, Stephanie.

I'll also say for the students who wanted to go to a four-year institution and get a bachelor's degree but do substitute over to a community college, there is great opportunity there. Stephanie and I both have written a lot about all the amazing programs that exist at community colleges.

But there also is the reality that many students who start out at a community college that want to transfer never reached that goal. Data show that about 80 percent of students when they come to a community college claim at least that they want to get a bachelor's degree and want to transfer. But a recent study that came out earlier this year from Columbia University, from their Community College Research Center, showed that only about a third of students who start at a community college actually do transfer. Only 16 percent of students who started at a community college finish a bachelor's degree within six years.

That transfer process is not as smooth and easy as one might hope it would be. If there is this shift to community colleges, even if students are enrolled, research would say that we're probably going to see a smaller number of bachelor's degrees being earned by these students in the long run, which research would then also tell you that, on average, they're going to earn less income than they would have otherwise, right? So, I think there definitely can be some long-term impacts.

Sablik: Well, I know you'll both be continuing to follow this issue, so I'll definitely encourage our listeners who are interested in this to check out the Community College Insights blog and look for the latest updates there.

Laura and Stephanie, thanks so much for joining me today.

Norris: Thanks for having us. Tim.

Ullrich: Thanks for having us.