The FAFSA Crisis Will Affect All Applicants

Remember Murphy’s Law? It’s the adage that “Anything that can go wrong will go wrong, and at the worst possible time.”  The development and rollout of the “Better FAFSA” by the U.S. Education Department (ED) is a prime example of Murphy’s Law in action.

There has been much finger-pointing between Members of Congress and the ED over the FAFSA debacle. Some Members say the ED has done a deplorable job of making the changes mandated by Congress in the Tax Simplification Act of 2020 (the Act). In addition to the overriding concern that it is several months late, critics point out that the newly released FAFSA has been rife with other problems such as:

• Many students could not access the form on the ED’s website until February.
• The ED’s help line was seldom available.
• Applicants with no social security number for a parent were denied.
• The FAFSA aid eligibility calculation didn’t account for three years of inflation.
• Students eligible for Pell Grants are unfairly denied because they’re dependents.
• The contractor, General Dynamics Information Technology, hired by ED to rebuild the FAFSA platform, repeatedly missed key deadlines.

The ED’s response is that they have been trying to fulfill Congress’s intentions, but that the intentions are a moving target, citing as an example the unintended ineligibility for Pell Grants for dependent students. The ED also maintains that they were not given funds by Congress to undertake the largest overhaul of the FAFSA system since 1992.

The most significant problem flowing from the late rollout of the new FAFSA is the fact that, as of March 14, the department has not sent FAFSA information to colleges. Colleges need this information to prepare acceptance letters and aid packages for admittees, so the remaining milestones of the 2024-25 admissions cycle are in jeopardy.

Failure to Communicate

How did a bipartisan, long-term effort to simplify the Federal student aid process become such a dysfunctional nightmare? The short answer is that the drafters of the Act didn’t understand the immense operational ramifications of their changes to the FAFSA.. Their impression was that implementation of the changes would be simple— just tweak the aid eligibility formula somewhere in “the system”.

This is why ED’s effort to develop an entirely new FAFSA system received no incremental funding from Congress. The Act’s proponents expected the project to be doable within the existing budget of the ED’s Office of Student Aid, but the effort necessary to comply with the Act was far larger than that.

After the Act was passed, officials at ED roughly estimated that the cost of the project would be $330 million. This was a large unfunded mandate for an executive department with a fully committed budget. Ongoing projects including reopening schools closed and restarting loan repayments after the pandemic, debt forgiveness programs, and developing a new system to support the ED’s loan processors.

It’s clear in retrospect that the original estimate was inadequate. A more realistic projection would have been $550 million. A better estimate of the time needed would have been four years. This would have allowed the legacy and the modernized systems to run in parallel for a year — standard practice for mission-critical system migrations. The ED did not conduct the kind of robust testing that could have revealed the system’s many flaws.

The ED defends itself from the accusation of not taking the task seriously enough. James Kvaal, the undersecretary of ED, recently stated that, “It’s not the case that anyone here didn’t realize how important this project is or how big this project is. And it’s been a top priority for us at the very highest levels of the department going back a year and a half now.”

The FAFSA Legacy System

When Congress reauthorized the Higher Education Act (HEA) in 1992 they created the standardized FAFSA form for students seeking Federal financial aid. In 2020, the Act necessitated the first overhaul of the system since in 28 years.

Not to get too deeply into the weeds, but the need to build an entirely new system rather than modify the old one should have been obvious. The project required the reconstruction of 20 interactive subsystems to replace the COBOL-based, IBM mainframe architecture that was already obsolescent. Some applications still operating in the system were over 50 years old. The legacy system was a house of cards even if untouched, so major changes to it would have simply caused it to halt and catch fire endlessly.

Bryce McKibben is a consultant who contributed to drafting the Act while working with the staff of Senator Patty Murray.. He said that the staff didn’t anticipate the replacement of the legacy system that would be necessary if the ED were to comply with the Act. “When we were negotiating the law, we did not know that the Department of Education would make that synonymous with overhauling all of its legacy systems.” he said.

Legislators and staffers should have known. Technology experts, had they been consulted, would have seen the need to retire the 28-year old legacy system and replace it with state-of-the-art technology. There’s a famous maxim from the 1960’s called Moore’s Law that holds that computing power doubles every two years, so 28 years equals 14 generations of advancement in digital technology. It would have been irresponsible to try to use the legacy system to meet 2020 performance standards.

All Class of 2028 Applicants May Be Harmed

The tumult over the new FAFSA has confounded applicants, parents, and colleges. The result will affect all applicants, including those who don’t need financial aid to attend college.

So far, about five million students have submitted a FAFSA, which represents 25% of high school seniors — 42% fewer than last year at this time. Over 17 million students were originally expected to submit the form this year. In addition to Pell Grants. Merit Awards,  and Work-Study, the FAFSA controls eligibility for loans. For many families, loans are needed to bridge the gap between their resources and college costs. No FAFSA means no Federal loans.

When colleges send out their award letter to admitted students, they list the financial aid that the student is eligible to receive. This includes state and Federal programs as reported to colleges by the ED on Student Aid Reports (SARs). SAR’s are normally provided to the student and the colleges indicated by the student on the FAFSA within two weeks of FAFSA submission. The FAFSA has traditionally been made available to students online on October 1. The majority of completed FAFSA’s are submitted and processed in November, so colleges have SARs for most students even before they receive applications.

This year, colleges won’t receive SARs until the end of March at the earliest. Only when they have a SAR in hand can a college prepare an award letter for an admittee. In addition to governmental aid, award letters include merit-based scholarships and other types of aid funded by the college itself as an incentive for an admittee to enroll at their school.

The ED’s slippage in the transmission of SARs this year has put pressure on most college’s May 1 deadline for enrollment. Even though many colleges have announced an extension of their deadline to May 15 or June 1, this may not be enough if the ED doesn’t issue SARs soon. Colleges anticipate serious logistical problems if the enrollment deadline were to be pushed back any further. They need time to prepare for the influx of students, including new freshmen, in late August.

Near-Term Expectations

If colleges are just now on the cusp of receiving SAR information from the ED, families will be stuck waiting weeks to find out how much student aid they’ll get. This will make it difficult to choose the college that fits them best. They may be forced to choose without knowing the true cost of colleges.

Low FAFSA submission numbers have the potential to impact an entire class of students. While some will find other ways to pay for college, research from the National College Attainment Network demonstrates a correlation between FAFSA submissions and college attendance. Attendance is likely to be down for 2024-25, as will revenue for many colleges.

What ultimately happens to the college Class of 2028 depends on how many more students submit the FAFSA for 2024-25. Although the deadline for submission isn’t until June 30, 2025, this doesn’t help students seeking to identify the best college in which to enroll without award letters in hand. They won’t be able to compare the actual net cost of the colleges that have admitted them. Cost is the overriding consideration in selecting a college.