After FAFSA Issues, Education Department Faces ‘Crisis of Credibility’

Hard-pressed college administrators got some welcome news last Thursday, when the Education Department announced an abrupt about-face. A few days after saying that it would not reprocess most of the financial aid applications that have been marred by a tax issue—around 20 percent of the millions of applications—the department announced that it would, in fact, do so. It was just one more turn on the roller coaster of mistakes and missed deadlines that have marred the rollout of the new Free Application for Federal Student Aid (FAFSA).

“I wake up every morning cringing about what update we’re gonna get today,” said Eric Nichols, vice president for enrollment management at Loyola University Maryland.

The FAFSA launch, plagued by a series of delays and technical issues, has shaken confidence in the department among college administrators, students and families. At this time of the year, colleges are typically finalizing their incoming classes ahead of the May 1 commitment deadline. But many have pushed off that deadline and are only now sending financial aid awards to students—a process that usually begins in January. At the same time, applications among high school seniors are down, sparking concerns about a potential enrollment drop across the country.

College financial aid professionals and other administrators, along with their representatives in Washington, D.C., have been frustrated by the steady stream of errors and glitches—and by what they see as a lack of transparency from the department.

“There’s definitely a credibility problem,” said Jon Fansmith, senior vice president for government relations and national engagement at the American Council on Education. “That’s because they keep slipping. Because errors keep being announced. Because people can’t rely on what they’re hearing. I don’t think there’s any intent to deceive, but it’s a nonstop litany of problems.”

Nichols said it will be difficult for the department to win back institutions’ trust during this financial-aid cycle, though he appreciated the steps taken last week to respond to an error in the way tax information was transferred to the form. The department has also eased some regulatory requirements and pushed back a key reporting deadline because of the FAFSA crunch. That helps, Nichols said, but if the department wants to earn institutions’ trust back long-term, the next financial-aid cycle, which is supposed to kick off Oct. 1, has got to be smooth.

For now, though, colleges are under the gun: They need the department to fix the form and meet key deadlines over the next week. By April 15, the department said it would begin reprocessing student records affected by the tax issue, which incorrectly transferred information from the Internal Revenue Service onto the form and led to incorrect aid calculations. The tax glitch affected the Institutional Student Information Records, or ISIRs, which are created when the department processes a student’s FAFSA. Colleges use the ISIRs to determine aid eligibility and package financial aid awards.

The department has also said students would be able to correct their rejected applications in the first half of April, a critical deadline. College administrators say about 20 to 30 percent of the FAFSAs they receive have been turned down for a variety of reasons not related to the tax issue—and they can’t do anything with those applications until they are fixed.

When you combine that number with applications rejected for other reasons, that means roughly 40 percent of the total FAFSAs are essentially unusable until they are corrected or reprocessed.

Nichols and others are skeptical about the department’s assurances that students will be able to update the form by April 15. Previously, the department had said students would be able to correct FAFSAs by mid-March.

“The department’s top priority remains getting schools and students the information they need to package and receive aid offers, and to make important enrollment decisions as quickly as possible,” a spokesperson said in a statement to Inside Higher Ed. “We recognize that while the Better FAFSA is easier and simpler for many families, implementing this new system has brought certain challenges.”

Justin Draeger, president of the National Association of Student Financial Aid Administrators (NASFAA), said on the organization’s podcast Thursday that the department is facing “a crisis of credibility,” particularly after a chaotic week in which the department began by offering more details about the tax issue. Seemingly in response to the escalating criticisms, the department began sharing daily updates last week about the FAFSA on a new blog.

Initially, on Monday, the department said it only planned to reprocess and correct ISIRs for students who would receive less financial aid because of the error—about 5 percent of the processed applications. It would be left to colleges to individually flag other files for reprocessing—a time-consuming activity for administrators already racing against the clock. After an outcry from college administrators, the department had reversed its plan by Thursday.

“We’re happy with the result, but why on Monday couldn’t they tell us that they would reprocess them all?” asked Jill Desjean, a senior policy analyst with NASFAA. “It’s when the story changes, it’s really hard to trust what’s coming out.”

Even that initial Thursday announcement wasn’t entirely correct. In it, the department encouraged colleges to keep using the incorrect ISIR so they could package aid offers more quickly. But a subsequent update clarified that schools and states can use their judgment about which ISIR to use, relying on the original version if reprocessing an application results in less financial aid for a student. Colleges received lists of affected and unaffected ISIRs by week’s end to help with their efforts.

“In our haste to both get the information out quickly to you all in the blog, and then post the [electronic announcement], we were not clear and perhaps inconsistent in our information about how to treat reprocessed records,” said Melanie Storey, director of policy implementation and oversight at the Office of Federal Student Aid, on a webinar Friday. “I know we’re throwing a lot at you. We are trying to err on the side of overcommunicating … and then sometimes we have bumps.”

College administrators said they appreciated that the department listened to them. But the back-and-forth was troubling, they said, and makes it difficult to trust what the agency says from day to day. They also took issue with the department’s news releases about the tax issue, which noted that more than 80 percent of FAFSA applications were unaffected.

“I guess that’s the positive spin you want to put on it, but the reality is 20 percent are bad,” said Brad Barnett, director of financial aid and scholarships and associate vice president for access and enrollment management at James Madison University. “It’s very simple math. We work with folks in the department who really want to get this right, and they’re not out to make this a bad process. Everybody, including them, wants aid offers out.”

Barnett, like others, said the department’s communications through the FAFSA roll-out have made the situation seem rosier than the reality, which has also undermined trust. Transparency and helpful solutions would be better, he said. “And work on solutions that we feel are really within the letter of the way that financial aid rules were intended to be,” he added.

That includes the basics such as awarding aid based on accurate information. The department’s suggestion earlier last week for colleges to use incorrect ISIRs to award aid went against “the way that financial aid officers are wired,” Barnett said. Plus, colleges can potentially be penalized if they use incorrect information to award financial aid in an audit or program review.

The department said it expects to start reprocessing the erroneous ISIRs in the first half of April, which tends to mean by April 15. It’s unclear how long reprocessing will take, and colleges are understandably nervous about more delays in this much-delayed FAFSA cycle. The department said the turnaround time for newly submitted applications is one to three days.

Caught in the middle of the FAFSA issues, of course, are the students waiting to hear from colleges about what kind of financial assistance they can expect. At an open house on Friday for admitted students deciding whether to attend JMU this fall, Barnett unsurprisingly fielded a lot of questions about financial aid packages.

Barnett explained to students and families how JMU was working to make the best of a difficult situation. But he didn’t have answers to many of their questions. Families, he said, don’t trust that the department will fix the FAFSA at all. Some parents asked him about the possibility that no aid offers will go out this year. While he assured them that won’t be the case, Barnett said the questions laid bare the mentality of parents at this stage.

“The thing that is going to help them the best is fixing this and fixing it fast,” he said. “The longer this drags on, the more problems there are, the longer it takes to fix corrections, the longer it takes us to get aid offers out, the more stuff that gets found—that trust just continues to be eroded.”