The FAFSA is Broken and Student Loans are on the Rise: How Families are Navigating the Cost of College
With college costs reaching new heights and a troubled new financial aid application, families are finding themselves increasingly reliant on student loans to afford higher education. The traditional approach of covering college expenses through family income, savings, scholarships, and grants is being challenged, leaving many families with a difficult choice: borrow heavily or potentially delay their child’s education.
Key Takeaways:
- Rising College Costs: The cost of a four-year college education is nearing $100,000 per year at some institutions, putting immense pressure on families.
- FAFSA Struggles: The new Free Application for Federal Student Aid (FAFSA) has been plagued with issues, leading to delays and discouraging families from applying.
- Increased Reliance on Loans: Families are increasingly opting for federal parent PLUS loans to bridge the gap in college financing, reflecting growing financial strain.
- Student Loan Forgiveness Uncertainties: The future of broad-based student loan forgiveness remains unclear, adding another layer of complexity to the financial picture for students and their families.
- College Still Worth It: Despite the challenges, most parents believe a college degree remains a valuable investment, highlighting the enduring importance of higher education.
The FAFSA: A "Stunning Failure"
While the FAFSA remains the doorway to federal aid, including loans, work study, and grants, its recent reform has proven problematic. The new FAFSA was intended to simplify the application process, but instead, it has caused significant delays and frustration for families.
"The Department’s poor planning has led to a stunning failure: Some college students might not have financial aid dollars in their hands in time to start classes in the next few weeks," said Beth Maglione, interim president, and CEO of the National Association of Student Financial Aid Administrators.
Only 29% of families who filled out the new FAFSA said it was easier to complete, highlighting the challenges faced by many. Nearly half of these families also reported delays in receiving their financial aid offer from their chosen school, adding to the stress of an already complex process.
The Growing Burden of Student Loans
The struggles with the FAFSA are contributing to a surge in student loan utilization. With families facing increased expenses and uncertain financial aid assistance, they are turning to borrowing to make college a reality. The share of parents taking out federal parent PLUS loans is also on the rise, a trend that underscores the growing financial burden on families.
"We’ve really seen that in times of economic hardship, [families] are falling back on borrowing for college," said Jennifer Berg, vice president of public affairs for market research firm Ipsos.
This trend raises concerns about the long-term financial repercussions for both students and their families, particularly as student loan debt levels continue to climb.
The Uncertain Future of Student Loan Forgiveness
The uncertainty surrounding widespread student loan forgiveness adds another layer of complexity to the financial planning process for families. Although President Biden has proposed targeted debt relief measures, the fate of broad-based forgiveness remains uncertain.
"Borrowing is up, at the same time, half of students expect their loans to be forgiven," said Sallie Mae’s Castellano. "You have to wonder, is there a correlation there?"
The lack of clarity about forgiveness policies creates a sense of anxiety for families, making it difficult for them to fully assess the financial impact of a college education in the long run.
College Remains a Priority: Despite the Challenges
Despite the challenges presented by the FAFSA and student loan issues, families are unwavering in their belief that a college degree remains a valuable investment.
According to Fidelity’s 2024 College Savings Indicator, 74% of parents have begun saving for their children’s higher education, a significant increase from 58% in 2007. This trend suggests that parents are recognizing the long-term value of a college education, even as they grapple with the increasing cost and financial uncertainties.
The commitment to saving for college reflects a belief that a college education continues to be essential for future success and opportunities. However, the current state of financial aid and student loan policies underscores the need for a more sustainable and transparent approach to higher education financing.
Looking Ahead: The Need for Policy Solutions
The challenges faced by families in navigating the cost of college highlight the urgent need for policy solutions to address the issues with the FAFSA, student loan debt, and the affordability of higher education.
- FAFSA Reform: The FAFSA needs significant improvement to ensure it is user-friendly, efficient, and accessible to all families. Streamlining the application process and addressing the current delays are crucial steps to alleviate the burden on families.
- Student Loan Debt Relief: The government should provide tangible solutions to address the growing student loan debt crisis. Whether through targeted forgiveness programs or more affordable repayment options, the current system needs significant reform to promote student access and affordability.
- Affordability and Transparency: Addressing the rising cost of college is critical. Colleges and universities must strive for greater transparency in tuition and fees and explore ways to make education more affordable, including increased funding for scholarships and grants.
The challenges confronting students and families in pursuing higher education are complex and require comprehensive solutions beyond simply relying on loans. By addressing the issues with the FAFSA, providing more accessible student debt relief options, and working towards improving the affordability of college overall, policymakers can help ensure that a quality education remains attainable for all Americans.
