Delays and government errors: How college financial aid became such a hot mess

New and returning college students' timelines for applying for federal financial aid and receiving their award offers have been thrown off this year after the botched rollout of a new application form – with the leadership of the office in charge set to change this summer.

College students and their families have been in limbo after issues with the implementation of a new FAFSA application form have caused delays in financial aid offers that have left many uncertain of what they'll receive when the new academic year starts in a few months.

In years past, FAFSA applications for the following year would open to students and families in October. Institutions would process applications in January to give students time before enrollment deadlines in May to evaluate their situation. However, delays from a botched update prevented applications from opening until January, when they were temporarily shut down, while a subsequent setback delayed the process further.

Richard Cordray, the chief operating officer for the Office of Federal Student Aid (FSA), will step down at the end of June, according to a report on Friday by the USA Today. The announcement comes as the Department of Education believes it has addressed issues with FAFSA applications, though it remains unclear how the delays will impact incoming college students still waiting for financial aid offers – which have historically had a May 1 deadline for acceptance, though some colleges have pushed that deadline back to May 15 or June 1.

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"Any students who have been waiting to fill out a FAFSA need to know that now is the time to fill it out," Undersecretary of Education James Kvaal told media members on Tuesday. "We know how important this is, and we will continue to do whatever we can to get students all of the financial aid for which they are eligible, and to help colleges make financial aid offers as quickly as possible."

"Students who complete a FAFSA today can expect their records to be sent to colleges within one to three days," Kvaal added. "It's been a challenging year for the FAFSA, but I'm proud of the progress we've made in recent weeks."

The Free Application for Federal Student Aid (FAFSA) is a document that must be completed by incoming and current students as well as their families if they want to receive federal financial aid at institutions of higher education in the next academic year.

The FAFSA uses information about the finances of a student and their family to determine how much federal financial aid they're eligible to receive – including subsidized or unsubsidized student loans.

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A bipartisan spending bill enacted by Congress in December 2020 included provisions that required the Department of Education to reform and streamline the process for submitting the FAFSA prior to the 2024-2025 award year.

The biggest change in the revamped FAFSA was the replacement of the Expected Family Contribution (EFC) formula with the Student Aid Index (SAI). The Department of Education said the SAI removes the number of family members in college from the calculation and implements separate eligibility criteria for Federal Pell Grants.

Delays from the Department of Education's overhaul process prevented FAFSA applications from opening until January, at which time it was temporarily shut down. 

When it reopened, it included incorrect inflation tables that had to be changed because the outdated data was understating the amount of financial aid students were eligible – which in turn delayed applications from being sent to colleges. Later, another mistake occurred when a federal contractor miscalculated a separate formula on over 200,000 applications.

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The agency said Tuesday it has since reprocessed nearly all the applications that were previously reviewed with known issues.

The requirement that FAFSA applications include their parents' Social Security numbers initially prevented hundreds of thousands of students who are U.S. citizens or permanent residents, but who have parents who are not, from submitting their applications.

The Department of Education said Tuesday that parents impacted by that bug in the system will be able to enter their tax information manually and will have a temporary workaround in place for the identity-verification process. The agency said it will notify applicants about the procedural change.

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Colleges, states and the federal government have different deadlines for submitting the FAFSA – so students and their families should ensure they complete the form prior to the earliest relevant deadline for their circumstances.

For example, the federal deadline for the 2023-24 FAFSA form is available to be filled out through June 30, 2024, but the Department of Education notes that waiting until the end of an academic year is a "bad idea" given other deadlines.

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The Department of Education maintains a list of state FAFSA deadlines for the current and upcoming academic year that can be referenced by applicants. Students and families should check with the financial aid office at institutions they're considering to determine those colleges' deadlines.