What low FAFSA applications could mean for the 2022-23 academic year
Could college enrollments be headed for another fall in 2022-23?
One early sign pointing toward the potential for declines is the Free Application for Federal Student Aid, or FAFSA, filings. Overall, they are down 9%, according to Department of Education data gleaned by the National College Attainment Network. Perhaps more serious is the drop-off in FAFSA renewals, which have fallen 12%.
Even with a bounce-back in March and solid numbers from first-time filers, there are indications that students may not be as enamored with the prospects of postsecondary education as they were even a few years ago. A number of factors, including increased employment opportunities, affordability and time to earn degrees might be driving the slowdown in FAFSA entries. Either way, it is something higher education leaders must monitor closely through the summer months.
“We think about FAFSA as a leading indicator of enrollment and retention,” says Bill DeBaun, senior director of data and strategic initiatives at NCAN. “We think about it as a signal of students’ intent to enroll. If we are seeing this very large decline in renewals, we have to consider the very real possibility that students are sending a signal that their enrollment decisions have changed.”
This past year, higher education enrollments fell about 3%, according to data from the National Student Clearinghouse Research Center, despite the fact that institutions welcomed back in-person learning and made a stronger push toward shorter-term credentials and career-driven pathways. In a tight economy, the need for credentials should be heightened heading to 2022-23.
“We expect enrollment to be countercyclical to the economy. We saw in the recession, students flooded back to colleges and universities to upskill and retool when the job market was bad. This is the polar opposite,” DeBaun said. “Employers are lowering their demand for credentials because they need people in the workforce so badly. So you have an outflow of students from colleges and universities. Some of this is to be expected at the macroeconomic level, but it’s the size of the declines that we’re talking about that we wanted to raise attention to. Not just because of the implications for students, but also universities and colleges need to understand that if they do not do something to encourage them to come back, we could be seeing a much smaller student body on campus this fall.”
The most recent FAFSA cycle beginning last fall started historically slow, with filings down 30% or more between Oct. 1 and Nov. 30 at some income levels. Those leveled out in the first two months of the year and increased in February and March, but it was not enough to overcome huge early losses. Overall filings compared with 2019-20 have dropped by almost 20%.
“In the short term, students are maybe looking at their opportunity costs and saying, I can make decent wages in the workforce,” DeBaun says. “Foregoing those wages is difficult for some students. The concern that I have is that when students stop out and wind up in debt with no degree, that’s associated with higher rates of loan defaults. They’re not really getting the long-term workforce bump that they would get with having a credential.”
Weak from the start
A closer look at the data shows just how uneasy this cycle has been for college leaders. Even through Jan. 15, FAFSA applications were down 21% among all applicants. A late comeback has helped make the data a bit more palatable but still not great, even compared with a couple of years ago when COVID upended all of higher education.
“The two cycles are a little bit different; 2020-21 was normal until mid-March, then the pandemic hit and the bottom kind of fell out of everything around us,” DeBaun says. “That introduced a lot of uncertainty, which caused renewals to crash. In the summer of 2020, we had a real lull in COVID. That probably built confidence and led to a bounce back. This cycle is a little bit different. It has been weak from the outset. This is more of a steady underperformance. That’s the piece I worry about. Is there a fundamental shift in college-going intentions?”
A deeper dive into applications by individual states shows the potentially dire situation facing the industry. Some 20 states showed a more than 10% decline in overall filings (first time and renewals), led by Michigan at -16.7%. Only one state, Texas at -1.8%, managed to post a figure under a 5% decline, and that is because it now requires that all high school seniors complete FAFSAs. In terms of renewals of FAFSAs and especially Pell renewals, every state incurred losses of more than 8.5%. Five states – Maine Massachusetts, Michigan, Minnesota, Montana and New Hampshire – all experienced more than 20% dips in filings from Pell students.
The most significant dips are occurring among renewals for Pell-eligible students, which were down at one point by 31% year over year. When those from other income levels made a big comeback in FAFSA filings through February and March, those with incomes less than $25,000 only saw a 7.5% rebound.
“If you’re from a lower-income background, in some ways, the hot economy kind of magnifies the opportunities you have to earn,” DeBaun says. “That pull may be stronger for those students. But if students persist, the long-run economic gains relative to not completing are also much higher for those students.”
That might be part of the pitch for higher education institutions as they look to gain back. DeBaun said there are a few ways colleges can help, but there is no magic bullet. “We strongly recommend that the K-12 and higher education sectors use their federal pandemic relief dollars to focus on postsecondary transitions, retention, persistence and completion supports as appropriate,” DeBaun says. “That includes preparing summer melt interventions, contracting with external partners to provide additional capacity where needed, and engaging students to understand how and why their plans might be changing and what we can be doing to support them and keep them enrolled.”
If there is a silver lining, it is that the high school Class of 2022 has increased the number of FAFSAs filings year over year by about 4%. “High school seniors may wind up with a higher FAFSA completion rate than the pre-pandemic class of 2019,” DeBaun says. “So that’s really encouraging.”