FAFSA Update Headache: How’d We Get Here?

The lack of certainty surrounding the rollout of the updated Free Application for Federal Student Aid, also known as the FAFSA, has plagued many in higher education for months now. 

Although the update was intended to simplify the process, the chaotic rollout has made it difficult for some to simply submit the application. Additional confusion has been caused by changes to the formula, which were intended to be more generous to students but could leave some out in the cold. 

The changes to the FAFSA have forced those in higher ed to question what the impact of the disruptions will mean for both the short and long term.

‘Simplification’ of the FAFSA 

The recent changes stem from the FAFSA Simplification Act of 2020. The idea of simplifying the form had been lamented for years leading up to the act, according to Karen McCarthy, vice president for public policy and federal relations at the National Association of Student Financial Aid Administrators. The act had two goals, including changing the underlying eligibility formula for financial aid to make it largely more generous to students by increasing eligibility and the size of Pell Grants and streamlining and simplifying the application. 

As part of the streamlined process, the number of questions was reduced, including questions related to different sources of income. The process had already been expedited to an extent following the 2019 FUTURE Act, which allowed applicants to permit the IRS to share tax information with the FAFSA.

The new application was originally supposed to be available for the 2023-24 academic year. However, the United States Department of Education delayed the release, with approval from Congress, for one year because it needed more time. Both pieces of legislation were implemented for the 2024-25 FAFSA.

Data from the National College Attainment Network indicates that completion of the FAFSA is one of the best predictors of whether a high school senior goes on to college. 

“Seniors who complete the FAFSA are 84% more likely to immediately enroll in post-secondary education,” the network found. “For students in the lowest socioeconomic quintile, FAFSA completion is associated with a 127% increase in immediate college enrollment.”

The findings from the network, McCarthy explained, suggested that simplifying the FAFSA could help increase college access. Additional findings identified a significant number of Pell Grant-eligible students either went to college without assistance or didn’t go to college because they didn’t think they would be able to afford it.

“Part of the idea behind simplifying the FAFSA would be to increase the number of students that are actually completing it and that hopefully will drive more lower-income students who are eligible for Pell Grants or subsidized loans to fill out a FAFSA to get assistance with their higher education expenses,” McCarthy said.

Delayed Timeline

In years past, the FAFSA was available Oct. 1. However, the Department of Education announced earlier that it wouldn’t be able to roll it out by then but would meet its statutory deadline of Jan. 1. Some students were able to submit the form starting on Dec. 30, with intermittent accessibility throughout the first week of January. After that, it was open 24/7.

In late December, the department also announced that, although the form would go live, institutions wouldn’t receive Institutional Student Information Records (ISIRs) until late January. 

“When the department delayed to December, everyone assumed schools would get the information right away because that’s how it always has happened,” McCarthy said. “It was a surprise because no one thought of those two processes as being separate.”

By Jan. 30, the department announced that schools would not be getting the ISIRs in January, but rather in the first half of March.

In the past, Dr. Anthony Jones, executive director of scholarships and financial aid at the University of Utah, said it took about 24-48 hours for him to receive an ISIR after a FAFSA had been successfully submitted. Normally, the university receives 10,000 ISIRs by the end of January.

By mid-February, Fairmont State University in West Virginia typically receives around 3,500-4,000 ISIRs. Tresa Weimer, assistant vice president for student success at Fairmont State University, is anticipating her university will have to surge resources to process ISIRs in a timely fashion, with the goal of 10-15 business days once they are released from the Department of Education. The outside software vendor the university uses for ISIRs has been working to stay current on all updates, but Weimer said a software delay could slow things down even further.

“Will it be a little bit chaotic? Yes, probably because they will probably come at the same time,” she said. 

The delay in the ISIRs is preventing schools from compiling financial aid packages. Financial aid packages are often a factor in a family’s choice of higher education institution. 

“Ultimately, the families need to be able to compare their aid offers from perhaps more than one institution and decide where they’re going to enroll. Ideally, they would have much more time than they’re going to get this year to make informed decisions and get all their questions answered,” Weimer said. 

McCarthy has noticed the delays are forcing schools to be nimble because of the moving target of timelines. 

“It is very stressful. There have been so many delays that financial aid administrators are not 100% confident that they will actually get the processed FAFSAs when Ed is telling them they’re going to get them,” she said.

Changes to Formula

There’s no denying that the formula changes will impact students, McCarthy said. 

“Whenever someone is tinkering with a formula that is as complicated as the federal methodology, there are always going to be some students who benefit more and some students who do not benefit from changes and might actually end up losing some benefits,” she said. 

For example, there used to be an exemption for small business owners so that they didn’t have to report the value of the business if they had fewer than 100 full-time employees, but now the exemption is gone. Small business owners will now have to report the value of the business if they are required to report assets on the FAFSA, which not everyone is required to report, McCarthy explained. 

Those who own and live on a family farm do not have to report the farm as being an asset. However, if the farm produces income, the value of the farm needs to be reported no matter whether the family lives on it or not.

“For some farm families that are required to report, that could be a significant change that may affect their eligibility,” she said. 

In previous years, there was a consideration in the formula for families with multiple students enrolled in college at the same time. The consideration has been eliminated partially because of equity and predictability concerns. 

“The argument is that it evens the playing field a little bit between families who have children who are spaced closely in age versus families who have children who are spaced further apart in age. In both cases, the families are responsible for paying for two college educations, so it shouldn’t matter if they’re paying for both of them at the same time versus paying for one, then four or five years later paying for another,” she explained.

Long-Term Impact

Fairmont State University has done some data analysis on its current students based on the new FAFSA formula, which showed that 70% of its students will receive an increase in their aid eligibility. 

“The long-term effect is going to be very positive for all students,” Weimer stressed. “I think when we get those ISIRs and start processing them, we’re going to see most of our students here will have a positive impact.” 

Jones said that if the FAFSA truly does expand eligibility and doesn’t leave out certain populations of students, that would be a good thing. 

“We just have to see what that expanded eligibility looks like,” he said. “Until we get ISIRs, we’re not going to know what that looks like.”