FAFSA Fail: Completions are down, debt is up
FAFSA completions are down 57% since last year, while student loans are at all time highs. What gives?
Whew! It’s been a busy few weeks, so apologies for the lull in writing–I got married on March 2, but we’re back!
What’s Happening in the Market
Stepful raises $12M Series A for online medical training to fix health care worker shortage (Axios).
Accenture purchased Udacity (many had predicted a sale to UpGrad). Accenture is going to use Udacity’s content platform and tools to expand their LearnVantage, their enterprise upskilling platform.
Highschool FAFSA forms declined by 57% in January ‘24, compared to that same time in ‘25. The FAFSA process had a redesign meant to simplify the process, but it was plagued by mistakes (such as using double negatives), errors (such as not taking into account inflation and thereby rejecting over $1B in qualified disbursements), technical glitches (inability to edit past pages), and support issues.
What We’re Talking About
Accenture’s purchase of Udacity is an interesting development in the upskilling space. LearnVantage is a B2B solution primarily focused on white-collar / knowledge economy talent. AI is going to accelerate a lot of changes in upskilling for these employees, and it’s likely that Accenture is going to try and convince their clients that asynchronous upskilling is the best bet. It’s an interesting new competitor for Guild.
Students took the new, revamped SAT for the first time this past week, which is designed to be shorter, digital, and do away with page long texts and questions. This follows in the wake of many colleges and universities returning to SAT requirements, after abandoning them during COVID.
One Big Idea
Federal officials tried revamping FAFSA, simplifying the process–a result of the 2021 FAFSA Simplification Act. College applications are up 8% this year compared to last, so why are FAFSA applications so much lower? FAFSA applications are sitting at about 5.7 million, down from 17 million at this point (The Hill).
And what does this mean for the many students and families making the monumental decision about the next step in their lives?
All These Changes–What Gives?
The form itself went from 108 questions to 46, and expanded from English and Spanish to 11 languages. Students can list twenty colleges, double the ten from the past. Some Pell Grants will be granted automatically!
So why is so much of the news bad news? I keep reading about massive delays in rollout, technical issues, processing delays, and more. The new FAFSA forms rolled out months later than previous years’. The federal government has been backlogged sending federal data to colleges, which then delays the colleges’ ability to put together financial aid packages; which has a cascading effect on students who make decisions based on aid packages.
Navigating the maze
Part of the decline in FAFSA applications must be attributed to the changing demographics of our college students. The expansion to new languages (including Tagalog, Vietnamese, Mandarin, Arabic, and Creole) is good, but it’s still a labyrinthine process, especially for first generation Americans.
The Presidents’ Alliance on Higher Education and Immigration released a report that found that 32% of 2021’s college applicants were first generation immigrants or the children of first generation immigrants, up from 20% in 2000 (link to report). The college-bound immigrant population has grown 78% while the total college population increased 22% over that same amount of time. In 2022, the University of California system reported a 4% increase in first generation college students from 2021, to 44% of their students.
Below, you can see the postsecondary status immigration status: First generation and second generation graduates have increased, while third-generation numbers have decreased.
Data Source: Raw data from Migration Policy Institute (MPI) analysis of data from the U.S. Census Bureau’s Current Population Survey (CPS) October 2000 and 2021 Educational Supplement
Disclosure requirements, such as parents’ tax information and immigration status, can be an obstacle for many first- or second-generation Americans. A technical glitch that blocks Americans with undocumented parents from completing the form is well documented. Meanwhile, people have recorded massive support delays—or, more commonly, a total inability to reach any support. Reading the FAFSA down detector is a miserable experience.
Impact on the Student Funnel
Applications for FAFSA are way down, but college applications are way up. And children of immigrants are a much higher percentage of the mix, too. That means we will have a ton of students missing out on federal aid and awards, loading up on debt. Average student loan debt in 2020 was $30,500, according to the National Center for Education Statistics (NCES). In 2023, that number catapulted to $37,090. It has doubled since 2007.
With the FAFSA delays and huge drop in completion numbers, we’re predicting that debt value to increase at its highest rate, period. This is catastrophic, and will ultimately continue to diminish the public’s perception of a four-year college degree, compounding enrollment issues on the horizon.