June Update: The 2024 FAFSA Crisis

Introduction

Two months ago, we wrote about the looming FAFSA crisis caused by a combination of factors, including delays in the rollout of the new FAFSA form. When we wrote our last piece in April, FAFSA completions for high school seniors were down nearly 36 percent compared to the same time in 2023. While we hoped that there would be a major catch-up period once the new FAFSA worked without error, we worried that numbers would not converge on 2023 levels.

This year, as colleges and universities approached the typical "Decision Day" enrollment deadline of May 1, many decided that students needed more time. Colleges across the country extended their deadlines to May 15 or June 1 to give students and their families time to complete the FAFSA process and review financial aid offers. The National Association for College Admission Counseling (NACAC) created a comprehensive list of all deadline extensions across the country. In general, smaller, tuition dependent, private institutions and regional public institutions were most likely to extend deadlines. According to the NACAC's research, only two Fifth District four-year institutions delayed their enrollment deadlines beyond June 1: Radford University in Virginia and Shepherd University in West Virginia.

The April and May FAFSA Catch-up

In April and May, there was a rapid increase in the number of FAFSA submissions and completions for high school seniors, and the decline in FAFSA completions dropped from nearly 36 percent on April 12 to 13.5 percent on May 31. Between April 12 and the end of May, there were 584,026 FAFSA completions, far more than the 179,435 from the same time period in 2023. This is certainly good news, as we were unsure in April whether or not completions would increase.

However, the sharp increase in FAFSA completions has not closed the gap between 2023 and 2024. As of May 31, 2024, the total number of FAFSA completions (1,804,070) still lagged completions from the same date in 2023 by more than 280,000 seniors.

The Reality in June

We are now past the enrollment deadlines for almost all four-year institutions in the United States, and as of June 7, FAFSA completions for high school seniors remained 12.8 percent below levels from the same date in 2023. Additionally, the catch-up effect is now diminishing, making it ever more likely that we will start the 2024-2025 academic year with FAFSA completion rates that are well below those from 2023-2024.

The rate of FAFSA completion declines varies across the Fifth District, ranging from a decline of 9.6 percent in the District of Columbia to a decline of 20.1 percent in West Virginia. Overall, 24,164 fewer high school seniors in the Fifth District had completed a FAFSA as of June 7 when compared to the same date last year.

Variation Within Districts

In our April post, we discussed the considerable variation in FAFSA completion rates within states, and even within school districts. We focused on Henrico County Public Schools: In April, their FAFSA completion declines ranged from 42 percent to 8 percent. The FAFSA completion declines were more severe at schools with more economically disadvantaged students.

The story remains the same in June, although all Henrico County high schools experienced the April-May catch-up we described previously. In fact, one school, Glen Allen High School, actually has a higher percentage of seniors who have completed the FAFSA this year.

What Does This Mean for Community Colleges?

It is unclear the exact impact the decline in FAFSA completions will have on higher education enrollment, but it seems reasonable to assume that fewer 2024 high school graduates will begin college this fall than their 2023 counterparts. However, it is also reasonable to assume that not all schools will be negatively affected. Colleges and universities that are highly selective and/or have low percentages of students who receive federal financial aid are likely to experience minimal changes to enrollment. This group includes most flagship state institutions, such as the University of Virginia or Clemson University, and elite private schools like Johns Hopkins University and Washington and Lee University. These schools typically maintain long waitlists and this year, they may have to reach deeper than usual to fill their freshman class, but they will likely enroll the number of freshmen that they had hoped.

The four-year schools that are the most likely to be impacted are the same group of schools that were hit hard by COVID-19-era enrollment challenges. This includes small, tuition-dependent private schools and regional public universities that educate a larger percentage of students who are Pell Grant eligible and/or use larger amounts of federal student loans. Financial aid packages — and thus, the FAFSA — are a key driver of where financial aid dependent students enroll and whether they attend college at all. These schools typically do not maintain long waitlists, and in fact, if more elite colleges and universities reach down further into their waitlists, these schools may lose candidates that they had hoped to enroll.

If there is a group of institutions that benefits from the FAFSA declines in 2024, it will most likely be community colleges. In April, we suggested this might be the case, and now in June, we feel even more confident that enrollment trends may be bending in community colleges' favor this fall. Community colleges do not have strict enrollment deadlines or hard FAFSA filing deadlines: At most community colleges, you can apply right before the semester begins and fill the FAFSA out at that time. The reality is that recent high school graduates who have still not filled out the FAFSA may not have many options this fall beyond community colleges if they hope to enroll in college.

Many of the community colleges we talk to regularly are experiencing enrollment increases this summer and feel confident that their numbers from fall 2024 will exceed those of fall 2023. This is a welcome sign for community colleges in parts of the Fifth District, as they were the hardest-hit sector during the COVID-19 enrollment declines. It will be crucial for these institutions to provide students with the academic and financial aid support needed for them to eventually achieve their educational goals. This fall, community colleges will likely enroll many students who thought they would attend a four-year institution. If bachelor's degree attainment is still their goal, community colleges will need to be mindful of the pathways provided to these students.

Views expressed are those of the author(s) and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.