Trusteeship Podcast Episode 43: FAFSA Delays – What Boards Need to Know

Morgan Alexander:
Welcome to the AGB Podcast from AGB, the Association of Governing Boards of Universities and Colleges. We cover everything higher education leaders need to know about the challenges facing our nation’s colleges and universities. More important, we provide the facts and insight you need to solve those challenges and to be the storytellers and advocates higher education needs.

For many students, the free application for Federal Student Aid known as FAFSA is the gateway to higher education. Every year, students and families fill out the FAFSA to help the Department of Education, institutions, and states determine what financial support students need to pay for their post-secondary education. It determines Pell Grant eligibility and other federal and state aids and institutions use it to inform their financial aid offers. This year, the troubled rollout of revised FAFSA is making headlines inside and outside academia. False starts, poor communications, and bad data have plagued FAFSA operations.

The latest data suggests that high school seniors have submitted 34% fewer FAFSA applications than last year according to the National College Attainment Network, that’s 34% fewer students who have applied for aid. The delays are causing headaches for students and families and for many financial aid and admissions offices with potentially serious consequences for some institutions serving those students who need that financial support the most to go to college. Our guest returning today, Alex Nock, is a principal of Penn Hill Group. We’ll explain what you need to know about the FAFSA delay, what it means for college university leaders, and what questions boards should be asking of senior administrators.

I’m Morgan Alexander, your host for this special episode of the AGB Podcast. Let’s get started. Alex, it’s good to see you. All eyes are on the Department of Education and the failure of the FAFSA rollout. How did we get here?

Alex Nock:
We didn’t just get here overnight, this has actually been the journey for the department and even Congress was involved, Morgan. Just about three and a half years ago or so, in December 2020, the Congress passed the FAFSA Simplification Act. So that was the bill instructing the Department of Education to undertake a lot of what it’s been doing over the past couple of years and what, as you pointed out, has been very publicly going on in the last couple of months. One year before that, the Congress also passed something called the Future Act, which was essential for the FAFSA Simplification Act to work. In a nutshell, these two bills combined together did two major things. One, they attempted to simplify the number of questions or reduce the number of questions that FAFSA filers would have to complete. They looked at eliminating questions that simply didn’t impact a lot of individuals. For most people, the FAFSA had lots of questions on it that simply they didn’t need to respond to, it wasn’t relevant to their individual financial circumstance.

At the same time, the FASFA Act in combination with the Future Act allowed the Department of Education to access IRS income information for FAFSA filers, so they would not have to put in their income information on the FASFA. Obviously, if anyone who’s listening who has ever filled out a FASFA or if you think like, gosh, there must be income information in the FASFA, you’re right. You know that, right? All that income information obviously can be gleaned from your taxes and the Future Act was essentially a bridge between the department and the IRS. So all that had to get worked out. The department had been working on it for many years. They realized after a little bit of work that they probably were not going to be ready for the original date of the implementation of the FAFSA Simplification Act, which would’ve been simplified forms for the ’23-24 award year, the award year we’re in right now. So they asked Congress for an additional year. Congress gave them that year, so it delayed the implementation to the ’24-25 award year, the award year we’re in right now.

But problems started to crop up last spring, at least publicly, right Morgan, where the department announced, Hey, we’re running into some issues. They indicated that they might not make the traditional October rollout for the FAFSA that we typically see every year. The FAFSA comes online and students and prospective students fill it out for the award year coming up. Then in late summer, it became very clear they weren’t going to meet the October deadline and they announced that their new goal was before the end of the year. If you fast forward to the end of 2023 or if you fast forward in reverse, I guess the department did sort of make the end of December, early January timeframe for rolling out the FASFA. They started with literally in the final hours of 2023, some initial windows of availability to fill out the FASFA. They ramped up over the first couple of weeks in 2024 and said, Hey, now the second week of January hit and the FAFSA is open for business, you can apply. However, then a really critical delay came into place.

The department had announced for months that they would open up the FAFSA for students filling out by the end of the year. Again, they mostly did that, but they said that the ISIRs or the Individual Student Reports that the department essentially compiles to provide to schools, so schools can package aid for students would go out at the end of January. Towards the end of January, they announced those will go out in the middle of March. So schools that were expecting not to have FAFSA information coming in or these ISIRs coming in the fall, like all right, we could deal with this. Morgan, you might remember many states backed up their own state aid deadlines and things like that. Well, schools then find out that they would not be getting this information. So they would’ve no information on the students looking to enroll and how to package their aid until mid-March. That was a critical delay. I know you want to also talk about where we are now, so I’ll kind of save for what happens next to your next series of questions.

Morgan Alexander:
Well, tell me Alex, this has been a major roadblock and to your point, the Department of Education got the FAFSA out in January, but there were a number of delays and it was down at weird times and people thought they could apply, but then it would go down to the middle of their application. It sounded like a mess. And to your point, there was delay after delay. There was a concern about inflation, if I recall, that the department hadn’t encountered or used inflation in their calculations, which is a problem and so they had to go back and do that, causing more and more delay. It’s now mid-March and I heard that the department is just now getting information out to institutions over the weekend. So yeah, where are we now? What’s happening?

Alex Nock:
Yeah, well you hit it right on the nose, Morgan, the department is starting to roll out these ISIRs, which most people, and except for financial aid officers probably didn’t know what the word ISIR was or the term ISIR was.

Morgan Alexander:
I didn’t.

Alex Nock:
Morgan, it’s a ubiquitous term around DC these days, as people are tracking what’s going on. So yeah, you’re a hundred percent right, the department has started to roll out ISIRs to schools. What they announced about a week or two ago was they would start with some very small numbers of ISIRs going out. A school might get one day, then not get one for a couple of other days and then get two and then maybe get one. And so the point of this was to start rolling out these ISIRs to allow schools to make sure they can receive the information and process it. The department is sending out something that has to interface, I guess with schools, software packages if they use those to compile and coordinate their financial aid packaging, but also to make sure these things actually had the right information in them, to make sure that schools were getting accurate information.

The idea was to begin to put out an ISIR or two to schools so they could test what they were getting to make sure it was accurate, did it interface with their systems and their software packages. After a week or two of that plan, the idea was to begin to ramp up their ability to send out more ISIRs. And then once they were at full strength or full speed, they estimated it would be about two weeks to clear what some folks have called the backlog of ISIRs at the department. Obviously it’s a backlog because of the delays in getting them out. It’s not the student’s fault or the school’s fault or anything like that. If you think about that timeline, if ISIRs went out over the weekend, it’s about the middle of March when those went out, if it takes about a week or two for the department to ramp up looking in, you’re solidly in the 20s or so of March.

And then if it’s two weeks after that, you will not have your complete set of ISIRs to the extent that students are not still applying to your institution depending on when your dates are until really well into April. Then you obviously have to package aid, and Morgan, for schools I doubt they get that one ISIR and they go, Hey, let’s give that person some institutional aid or let’s figure this out because they want to see the totality of their student body as they begin to allocate aid.

Morgan Alexander:
Right, they’ve got to build a class.

Alex Nock:
A hundred percent, a hundred percent, right. So that’s where we are. We’re really looking at a couple more weeks probably before a lot of schools that had institutional aid and other aspects to package, work-study, SEOG funds. And just the process of packaging aid and making sure students get their letters and things like that, we’re going to be willing to April for a lot of schools to do that, possibly into May for schools that may not use software packages and may what they call manually process.

Morgan Alexander:
Okay. This has been really helpful for context. This is a big deal for many students and a problem for them and the institutions that they want to attend. Let’s talk about the governing board lens to this problem. What questions do you think boards need to be asking?

Alex Nock:
I think there are a number of really great questions here that boards need to be thinking about, and it really depends on what sector or type of school you are. If you have a traditional spring announcement date for who’s in your class and things like that, that’s probably been delayed. You’ve probably backed up application deadlines. You’ve probably backed up deadlines for when students have to put down deposits if they are attending and things like that. If you’re a school that does rolling admissions and things like that, this may not be as immediately impactful for you. But either way, I think there are critical questions for boards, one of which is how has this delay impacted your ability to attract the class to build the class that you just spoke about, Morgan, who’s coming. I think you mentioned a really critical data element here that roughly half of FAFSAs compared to a typical year have been filed. That’s a lot less students asking for aid.

Morgan Alexander:
For sure.

Alex Nock:
You have to think from a mathematical standpoint that that is going to mean less students are attending college this coming fall, if you think about traditional start times. Unless we get a really big burst of FAFSAs, it does seem like less people will be asking for aid. You have to think about what happens if I get lower enrollments. Do I have issues of having to ensure if I have dorms on campus, filling dorm rooms, room and board costs, what is my income flow or my resources that are flowing in. Do I traditionally attract a lot of students who are on financial aid, that I’m not sure if that traditional class will be showing up. And where do students decide to go, if financial uncertainty is there, could a slightly higher-cost institution lose out more so this year to a lower-cost institution? If an institution is delayed in packaging their aid compared to another institution in the state, does that faster institution get more students to come? These are really critical questions that we wouldn’t normally have in a given year.

I do think there’s financial concerns that a board should be talking about. I do think there’s a cashflow and certainly enrollment set of questions and also, gosh, there’s probably a lot of uncertainty for students with the financial aid office. Are you staffed up there properly? Have you thought about temporary help if you need it through contracts and other things? And do the students themselves that are applying at your institution, do they have the supports they need in a really uncertain time to make the decision that’s best for them as part of this? So all these things are super important and I would think boards would want to think about some of these questions.

Morgan Alexander:
Absolutely. I think that if they haven’t been asking the question the last two months, I hope that they can ask the question now about what is the risk to our institution because of this delay, what does our student body look like? What does the impact on the yield of students? There’s a lot of headlines right now that are saying, are we going to lose a generation of students from this because they don’t fill out the FAFSA at the traditional age of when they typically go to college. Does that mean then they’ll just decide to forego college entirely? There’s a conversation going on I think about can institutions help high school guidance counselors talk to students about FAFSA and help high schools get their students to complete the FAFSA even though it’s been late. Governing boards aren’t in the trenches having to go to high schools, but they need to make certain that their financial aid offices have the resources that they need to address this problem now. It probably wasn’t something that they budgeted for.

I hope these institutions can think about this issue from a risk perspective, from an admissions perspective, as you mentioned, as a budgetary issue, an admissions issue and so to just understand what the administration is doing and what impact this will have on their campus. As you said, a lot of campuses will have different impacts depending on how many students they serve, how many of their students actually fill out the FAFSA year to year. Questions like that are going to inform boards in their oversight capacity to make certain that the institution is doing everything it can to thrive in the next year despite these headwinds. I think this is an opportunity to ask these kinds of questions and make certain that everything is going the way that we want it to. So Alex, final question. What can institutions and boards expect to see in the coming weeks and months related to the delay? What’s going to happen with the FAFSA?

Alex Nock:
Well, first, hopefully more ISIRs, right? The ISIR is actually flowing, that’s the critical element here. The other thing is ED has announced, the Department of Ed has announced resources for schools that are struggling. They have some resources out through some of their partners. They certainly are trying to do more. I would say if a school looks like they’re struggling, I’d be reaching out to ED right away if I’m concerned about something. I think there’s a lot riding on this for Ed to work out with substantively and politically.

I would hope that schools will be able to get assistance, but look for these ISIRs to roll out, look for the financial aid packages to be issued and look for all that critical class building that you talked about to happen. Let’s hope too, we get a real surge in FAFSAs being filled out, and we get a lot closer to a normal year. I’m like you, I’m worried about some of those things you talked about that year where we simply don’t have it. That’s really one of the big questions we need to look forward to is who fills out a form so they might still go.

Morgan Alexander:
Great. Thanks Alex, I really appreciate your time and talking to me about this. I hope our listeners come away with some questions to ask, some policies to think about. For more information about the public policy issues that are most important to boards, I would check out our top public policy issues report on the AGB website. We’ll also include a resource or two about the FAFSA delay in the show notes and so I hope people check that out at the conclusion of the podcast. So again, thanks Alex. Thanks Penn Hill Group, you all have been really great to us over the years and we hope to hear from you all soon. Thanks so much.

Alex Nock:
Thank you, Morgan.