Incomplete FAFSAs Leave Billions Unclaimed in Financial Aid Each Year

Young multi-ethnic group of people doing a research on student loans.
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A 2016 report by the National Association of Student Financial Aid Administrators showed that many students who are eligible for federal financial aid enroll in college without completing the FAFSA, and leave about $24 billion in federal aid on the table each year.

See: 6 Common Mistakes to Avoid When Filling Out Your FAFSA
Find: Everything You Need to File a FAFSA by the June 30 Deadline

The report’s author, Michael Kofoed, assistant professor of economics at the United States military academy stated, “The failure to apply for and obtain federal aid is of great concern because financial aid can influence whether a student enrolls in college, the type and quality of the institution a student chooses and the probability that a student persists to graduation.”

This means that the FAFSA is not only a barrier to entry for financial aid but potentially for success later on in life as well. The FAFSA application also allows states, colleges and universities and other organizations to use data from the application to determine aid eligibility for other programs such as scholarships and Pell Grants. Still though, as the NASFAA points out, its complexity is a primary deterrent for some students.

The coronavirus pandemic hit low-income families particularly hard and widened the wealth inequality gap. Despite this, even fewer families applied for financial aid this year than last year, CBC reports. They add that as of June the number of applications was down 5% from last year, with just over half of all high school seniors applying.

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Bill DeBaun, director of data and evaluation for the National College Attainment Network, told CNBC that “people don’t skip completing the FAFSA because they have all the money they need for college.”

In fact, research shows that students from low-income backgrounds, students of color and first-generation students have been hardest hit by the COVID-19 pandemic and FAFSA numbers suggest some of these would-be undergraduates have decided to forego college entirely, CNBC adds.

Kofoed added that his research could help policymakers and higher education administrators identify certain groups of students who are not reached by school counselors or other programs before they enter college. He also highlighted that while improved FAFSA completion would “increase the amount of money spent by the Federal government on education, the returns in the form of increased tax revenue from workers’ increased income, possible health benefits and a more engaged citizenry may be worth the increased investment.”

See: Is College Really Worth It? A Look at the Grim Reality for Student Loan Borrowers
Find:  The Top Colleges with the Most Financial Aid – ‘These Schools Are Smoking Deals’

The process has famously been the biggest hurdle to applying for the loan, as many families are not even aware they are eligible because they do not bother to apply. It requires a lengthy input of information for both the student and the parents, with separate forms thus increasing the time it takes to apply.

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Congress seems to have been listening, as the Consolidated Appropriations Act was passed in December of 2020 in an attempt to simplify the process. Those changes were slated to go into effect for the 2023-2024 academic year. Earlier this month, however, the Department of Education told Congress the simplification process would be delayed until the 2024-2025 school year due to delays in obtaining the technology upgrades necessary for the change, CNBC reports.

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

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