What the heck is happening with college financial aid this year?

By Zachary B. Wolf

The already stressful college admissions process was thrown into chaos this year by a botched bureaucratic upgrade. Hiccups and delays in the federal financial aid process have kept some high school seniors and current college students from getting aid packages from schools.

The dirty secret of college tuition is that most people won’t end up paying full price, but the delays mean that many students have not yet received the real offers. Students can’t finalize plans if they don’t know how much things will cost.

The meltdown occurred, ironically, because the government tried to make it easier to fill out the FAFSA – the Free Application for Federal Student Aid.

Katie Lobosco is a CNN reporter who covers higher education, and she notes that every college student, whether they are new or returning, must submit the FAFSA in order to be eligible for federal grants and loans. In most cases, the FAFSA is also used to determine financial aid provided by colleges as well, though some require students to submit an additional form.

The FAFSA fiasco has created a two-front student debt issue for the Biden administration. On the one hand, President Joe Biden has used executive authority to try to forgive many existing, burdensome student loans. On the other hand, his administration is struggling to get students access to financial aid in the first place – which puts some students at risk of missing out on scholarships and grants, potentially forcing them to take on more student debt to begin with.

I talked to Lobosco by email to figure out what’s going on with the FAFSA.

WOLF: What the heck happened with the FAFSA this year?

LOBOSCO: To put it bluntly, the whole FAFSA process has been hit with delay after delay this year, leaving students and colleges in limbo.

The Department of Education released a major overhaul of the FAFSA for the 2024-25 academic year, as required by Congress. And while the new version is meant to make the process of applying for college financial aid easier for students and families, the rollout of the form has been anything but smooth.

First, the form wasn’t available until the very end of December – about three months later than usual – and was offline for many hours of the day during the first week of January. Since then, the FAFSA process has been plagued with problems and glitches, making it hard for some students and families to complete the form.

What’s more, a series of FAFSA calculation errors made on the backend were found in the past month that potentially impacts about 1 million forms that have already been processed.

These blunders create two major problems:

Is the problem fixed?

WOLF: Have all students gotten aid letters at this point?

LOBOSCO: Some but not all problems have been fixed. Several known issues remain, impacting some people when they are filling out the form. And the Department of Education still has to reprocess some forms.

Typically, colleges and universities send students their financial aid award letters in March – but this year, schools didn’t even begin to receive FAFSA information until March. Once they receive an applicant’s information, they then can develop an aid package (usually consisting of scholarships, grants and/or loans) to offer the student.

Most of the students I’ve spoken with are still waiting for those letters and, because of the complicated way financial aid works in this country, they won’t know how much college will cost them next year until they receive them.

What’s the new timeline for seniors?

WOLF: When do high school seniors have to decide where to enroll next year?

LOBOSCO: Colleges and universities usually give students a deadline of May 1, commonly known as “college decision day,” to say whether they intend to enroll in the fall and to pay a deposit. Hundreds of schools have said that they will push back the deadline this year due to the problems with the FAFSA – but others have not.

This is why students and families are freaking out. They may have to decide where to enroll without having all the information about how much their options will cost.

Who is this affecting?

WOLF: What do we know about the hundreds of thousands of people who may not have completed their FAFSA yet?

LOBOSCO: It’s safe to say that hundreds of thousands of students still have to submit the form this year in order to qualify for financial aid starting in the fall – and the fear is that low-income families that need the help the most are the ones getting tripped up by all the glitches with the process.

About 34% of high school seniors had submitted the FAFSA as of March 22, according to the National College Attainment Network. That’s about 29% fewer compared with the prior class at that same point the year before.

There has been a bigger drop in the share of high school seniors submitting the FAFSA from lower-income schools as well as those schools with a higher percentage of minority students, according to the NCAN data.

Who is to blame for this?

WOLF: Do we have any idea why this happened?

LOBOSCO: There’s plenty of blame to go around. The Biden administration has said that this was a huge undertaking – one that not only transformed the FAFSA form itself, but the calculations and backend processing system as well – and that its requests for more funding from Congress were not met.

Republicans argue that the Department of Education was too focused on implementing Biden’s student loan forgiveness policies and let the FAFSA work fall to the wayside.

Some frustrated families are saying the government should not have released the updated form if it wasn’t ready for prime time. But Congress required the changes be implemented by January 1, 2024 – a deadline that had already been pushed back a year.

What’s the prognosis for next year?

WOLF: I’m reminded of the fantastically horrible rollout of healthcare.gov, a failure of bureaucracy that was fixed in subsequent enrollment periods. Will this FAFSA problem be fixed next year?

LOBOSCO: No one knows for sure, but I think the FAFSA process will be a lot smoother next year. There may be some glitches here and there, but the Department of Education is working out all the kinks as they come up.

Plus, the government has every intention of opening the FAFSA on October 1, as per usual, for those applying for financial aid for the 2025-26 academic year. So students and families will have more time to complete the form and, if all goes as planned, colleges and universities will get the information they need from the FAFSA with enough time to send their aid packages to students in March.

This is a separate issue than Biden’s efforts to relieve student loan debt

WOLF: While the Biden administration gets low marks for this FAFSA fiasco, Biden has done quite a bit (without Congress) to work toward student loan forgiveness. What are the broad outlines to know about that? 

LOBOSCO: This is true. The Biden administration has made it easier for borrowers to get debt relief. About 4 million people have seen their federal student debt canceled under Biden, totaling about $144 billion.

His administration has done this largely by canceling debt through existing programs that deliver relief to certain groups of borrowers like public-sector workers, students who were defrauded by for-profit colleges, and disabled borrowers. (Biden’s broad student loan forgiveness program that got the most attention was struck down by the Supreme Court last year and never took effect.)

But those debt relief efforts don’t help high school seniors applying to college right now who are frustrated with the FAFSA problems. They would only help students after they’ve accumulated student debt and don’t address the root of the problem: College is expensive.

What do people need to know about this process?

WOLF: You cover this issue. What do you wish more Americans knew about how the financial aid process works?

LOBOSCO: I think the problems we’re seeing with the FAFSA this year highlight just how complicated our nation’s college financial aid system can be.

The cost of college is hardly transparent for families. Colleges and universities publish tuition prices and room and board costs – but these “sticker prices” are not usually what students and families end up paying. Only after they receive their financial aid award letters from the colleges – the ones most are waiting for right now – do they truly find out what colleges is going to cost them for the next year.

What are the solutions?

WOLF: The growth of student debt has been cited as a major issue and a barrier to economic mobility, which is ironic since a college degree is supposed to help people improve their situation. What are some of the more interesting ideas about how to fix the system?

LOBOSCO: I can’t say I’ve seen many novel ideas gain traction in Congress during my years covering this issue, as the left and the right generally disagree about the best approach.

Progressives like Sens. Elizabeth Warren and Bernie Sanders have called for using public funds to make some colleges free – or, at a minimum, subsidize the cost enough so that lower- and middle-income students don’t have to take on debt to complete their degrees. Biden has proposed making two-year community colleges free.

A broad bill put forth by House Republicans includes a variety of provisions to address the cost of college, including: making colleges pay when students can’t afford their student loan payments – a policy called “risk-sharing”; putting limits on how much students can borrow; and changing the way interest on federal student loans capitalizes.