Higher education has gotten a lot of bad publicity lately. In April, TV cameras captured on-campus clashes across the United States as students protesting Israel’s bombing of Gaza faced off against police, and college administrators tried to balance the students’ right to free speech with the need to maintain order and safety. In May, clashes turned violent, more than 2,600 students were arrested, according to a May 10 Associated Press report. Many of them face suspension or expulsion. 

The disruption on campus has overshadowed another crisis of equal significance playing out among parents of next year’s freshman—the devastatingly flawed rollout of the new Free Application for Federal Student Aid, or FAFSA. The new form has been a flop, critics say, with a slow rollout, technical problems and then a big delay in processing that has held up students’ aid packages.

Mark Kantrowitz, a Skokie, Ill., college planning expert and author says, “It’s worse than what happened during the pandemic.” Robin Stacey House, the founder of Our House Wealth Advisors in Chicago, says, “It’s the worst admission season I’ve ever seen.”

That’s created even more excruciating stress for college-bound students and their families—and it’s expected to derail the plans of a significant percentage of college hopefuls, says Kantrowitz, many perhaps permanently. As of early May, the number of FAFSA forms completed was more than 20% lower than it was a year ago, according to the National College Attainment Network’s FAFSA Tracker. 

According to Joseph Bogardus, a CFP at Barnum Financial Group’s Center for College Planning in Shelton, Conn., “The college crisis right now is a bigger issue than just the campus protests. Columbia is still going to attract students, and in two years, once this blows over, their enrollment will still be their enrollment.

“The bigger issue is the combination of government and technology,” he continues. “The two are like oil and vinegar.”

The new online FAFSA started late out of the gate. It was scheduled for October 1, but was actually available for the first time on December 31—and then only for 30 minutes, Kantrowitz says. That was just the beginning.

“The U.S. Department of Education was building the plane as they flew it to the destination, crashing it multiple times along the way,” he says. “And they called a soft launch, which meant they were accepting the form submissions, but not processing them.”

Many colleges set May 1, 2024, as the deadline for accepted students to commit to enrollment this fall. But when that day arrived, many students knew only half of their financials, since only their merit aid for academic, athletic or musical scholarships was included in their acceptance letter. The other half—the financial aid—was and still is missing, so parents and students have no idea how much they’re going to have to borrow.

“In theory, the reason they changed the [FAFSA] form was to make it easier. And the actual form is easy. It should take less than an hour,” Bogardus says. “It just isn’t working.”

While students and parents wait for resolution, financial advisors can still play a large role in helping clients navigate the maelstrom. “The first thing to tell them is, don’t panic. Everybody’s in this boat. It may be sinking, but everybody is in the same situation,” Kantrowitz says. “If there’s a problem with the FAFSA ID, contact the U.S. Department of Education, talk to your high school counselor and your college financial aid administrator. Tell the colleges that have admitted you that you have a problem. They might have suggestions.”

When The Aid Makes A Difference
While many clients of financial advisors will not qualify for financial aid, some will, and those families could make the mistake of committing to a school without knowing all the economic factors, especially if the school is putting pressure on them to sign. And many are.

“Don’t commit until you have the numbers. And telling one school you don’t have all the numbers from other schools is OK,” says Joe Messinger, a co-founder at Capstone Wealth Partners in Dublin, Ohio, who holds both a CFP and a ChFC. “You need to know before you sign.”

Absent the aid allotment letter, advisors can help parents ballpark what part of the tab the school would pick up using the college’s net-price calculator, which also gives users a personalized estimate of their contribution.

According to Kantrowitz, students who don’t want to accept one offer on faith that they’ll be able to afford it when the aid package finally comes can put down deposits on multiple colleges to keep options open. “Theoretically, you would lose the deposit on the schools you don’t go to, but I have a feeling if you ask them for a refund, they might very well give it to you because they don’t want to be seen as exploiting students and the uncertainty this year,” he says.

Business As Usual For Borrowers
According to advisor House, most students whose parents have financial advisors won’t be eligible for financial aid, and those students can get on with making a decision. But she says it’s up to advisors to show clients the true cost of borrowing for each college that’s sent an acceptance letter.

“I always tell the kids, ‘This is your loan payment, this is your average income after tax on a monthly basis, and these are your three options depending on what school you choose: You could potentially move out after saving for two years after college; you’re going to live in your parents’ basement the rest of your life; or your parents are going to live in your basement the rest of their lives,’” she says.

Bogardus warns that borrowing is particularly tricky this year with a double whammy of sticky inflation and high interest rates—currently set at more than 8% for parents’ PLUS loans—that will hang around long after the FAFSA is fixed.  “It’s very emotional. I’ve had clients cry on the phone,” he says of breaking the news to clients that they can’t afford a particular school. “But as a fiduciary, you have to tell them.”

Students who borrow beyond their means could face big consequences, and not just financial ones. There are adult children who don’t talk to their parents anymore because their parents let them over-borrow for a “dream school,” Messinger says.

“Literally, they don’t go home for the holidays, and they don’t talk to their parents because their parents weren’t parents. They didn’t help them really understand the money,” he says.

But it doesn’t have to end up all disappointment if the student is willing to share the burden in a meaningful way that lowers the debt tab. For instance, a student could do something like take a position as a resident assistant at a college dormitory, he says, which would eliminate the cost of room and board and knock $45,000 or $50,000 off college money needs.

A Silver Lining For The 1%
In an unexpected twist to the FAFSA fracas, there may be a silver lining for students who don’t qualify for federal aid, and it has to do with getting “heads in beds.”

“The needs-based folks, which is probably 60% to 70% of the population that go to a lot of schools, they’re not committing because they don’t have the financials yet,” Messinger says. “So if you have a scholarship offer, go back and say you need more. They’ll probably give you additional scholarship [money] because they’re not getting those other commitments. This is a unique year for non-financial aid candidates to leverage that.”