Checking Assumptions on FAFSA Fiasco Demographics

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Last week we began a deeper dive into the ongoing FAFSA fiasco with far fewer potential college and university students succeeding in filling out the federal financial aid form. We believe this issue will drive much of the EdTech and online education environment in the US for at least the next year or two, with a massive impact on college and university enrollments and therefore finances. The first post showed how the scheduling issues started in early 2021, and the second post looked at completion data by state and city.

With this post, we are looking at an initial view into the demographic angle - are we seeing greater declines in schools or states with higher rates of poverty or percentage of first-generation students?

Data Note: For this post we are combining data from the Federal Student Aid (FSA) office at ED, data from the US Department of Ed (ED) and its School Neighborhood Poverty Estimate, and from the Center for First Generation Student Success as reported in Forbes. Also note that the main FSA data is from a reporting tool for high schools provided by ED and is for students 19 and younger, and thus not looking at students not in high school or older than 19. The poverty estimate is primarily for public high schools.

Additional Note: This is an initial view of the data, attempting to get past gut-feel assumptions, but it is not exhaustive enough to disprove theories. Instead, we are looking to see if certain demographic variables jump out of the data or not.

FAFSA Completion Drop by High Schools

The first thing to notice is that there is a classic bell curve centered around the nationwide 40% drop Year-over-Year (YoY) in FAFSA completions 2023-24. In addition, however, note the spike at 0%, where a large number of mostly small-enrollment schools had roughly equivalent numbers of FAFSA completions 2023-24, followed by somewhat of a long-tail to the left of schools that actually increased the number of completions.

Low-Income Correlation

Now we can combine the ED data on poverty estimates, in the form of income-poverty ratio (IPR) as a percentage, showing a high school’s average household income compared to the federal poverty level for those household structures. 100% = average family at the poverty level. The chart below shows the YoY FAFSA completion drop against IPR combined into groups of 50%.

There is somewhat of an effect from family income levels, with schools with <250% IPR averaging a 45% drop and schools with >600% IPR averaging 33% drop, a difference of 12%. The pain appears to be somewhat widely shared across income levels, when measured as the likelihood of FAFSA completion drops.

But what about raw numbers instead of percentages? The chart below shows the number of FAFSA non-completers (drop from 2023 - 2024) in each IPR group (blue, left axis) as well as the number of 2023 Completions (orange, right axis). The reason to show both metrics is to compare to the baseline - how students typically complete the FAFSA. If average family income is a significant predictor of FAFSA Completion drops, we should see divergence between blue and orange.

We see a small divergence here, but it is the shape of the chart that matters. The orange bars show that the majority of FAFSA completers are in high schools ranging from 150% - 400% of poverty level, with a clear peak at 200% - 250%. This makes sense, as these are the students who most need financial aid - typically above the Pell grant levels but not able to afford college or university on their own.

And this shape is very similar to the drop in FAFSA completions - the non-completers in blue.

The FAFSA fiasco indeed is likely to hit lower-income students more than others, not so much because these students are more likely to be non-completers, but more so because there are so many more of them filling out FAFSA in typical years.

First Generation Students by State

We do not have a measure of first-generation students at the school level, but there is data at the state level. If the decline is “made up primarily of … first generation” students, we might see a strong correlation between first generation and YoY declines.

At least at the state level, however, this correlation is not that obvious. The following chart compares state ranks of high school first generation students to YoY declines, with 1 = high and 51 = low. If state first generation percentage is a significant predictor of FAFSA Completion drops, we should see nearly horizontal state lines.

But we do not. At least at the state level, the percentage of first generation students does not show a major correlation with the FAFSA completion drop. California is in particular trouble, ranking first in the percentage of college first generation students and first in the percentage drop in FAFSA completions. And North Dakota and New Hampshire are fairing best. But in between these extremes, there is no clear pattern.

We suspect that the FAFSA completion drop ranking has more to do with state policy on FAFSA completion as graduation requirement and state-level aid funding than it does with a simple percentages of first generation students.

It would be better to see do this comparison at the high school level, but we do not have those data.

Implications for Higher Ed

If this view is accurate, there could be several implications. Given the caveats in the notes above, what might the picture we have painted above mean for higher education?

• It probably means steeper enrollment drops for institutions that typically draw from large urban schools, most likely regional comprehensives and larger state schools.

• In some ways, this is good news for community colleges, or at least less awful news. Given the strong representation of lower-income and first-generation students in community colleges, if there were stronger correlations in the data, the outlook for community colleges would look especially grim especially against a backdrop of ongoing enrollment declines in that sector.

• Typically, institutions see larger enrollments in the Fall with a decline in the Spring. That situation might be reversed in the next academic year as some students put off starting until they have a clearer picture of what their financial aid might look like.

• We could see a temporary surge in enrollments in open access institutions and online institutions with rolling deadlines, as students who want to enroll use these options as a stopgap, whether or not they go on to transfer to the school type originally intended.

But remember that we don’t know a lot about, including:

• What are relative completion rates for returning students and non-traditional students?

• What’s going to happen in the next couple of weeks and months as people are able (hopefully) to fix submissions where there are errors and institutions can make offers?

• Will students actually show up to campus, or will this be the final straw pushing students to not attend college or university against a years long demonization of higher education?

Parting Thoughts

As we have hopefully made clear throughout, this is an initial view of the demographics. The one group that has much better data is ED - they should be analyzing demographic data to find patterns, and sharing those results, in order to help educational institutions and state policy makers figure out which interventions are most helpful in the next few months.

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