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FAFSA Frenzy

September 18, 2008

Jim Belvin has seen this movie before. As a longtime director of financial aid at Duke University, Belvin recalls a number of past economic downturns that caught families off guard, and invariably they’ve turned to his office for help.

“I’ve always referred to the financial aid office as the canary in the economic mine,” said Belvin, who is soon to retire after 38 years at Duke. “Our phones usually start ringing early, before the news media seizes on the crisis.”

This year, Duke saw a 6 percent increase in the number of students who said they intended to apply for need-based aid, Belvin said. While Belvin speculates that only about 1 percent of the new applicants will ultimately qualify for institutional aid, the increase reflects growing anxiety among students and their families amid a period of economic turmoil.

“I think there is some concern going on -- some reality, some overreaction,” he said.

The uptick in financial aid interest is widespread. Across the U.S., millions more students filed federal financial aid forms in the first half of 2008, marking a 9 percent increase over the same period last year, according to federal data. ( Note: This version of the article corrects an error based on incorrect information provided by the U.S. Education Department.)

And significant enough numbers of those applicants are qualifying for federal aid that the federal government appears headed for a major shortfall in Pell Grant funding, The New York Times reported today. The Times cited government data showing that 800,000 more students had applied for Pell Grants through July than had done so by that point in 2007, and that that could result in a shortfall of up to $6 billion.

Numerous factors are believed to be in play in the Pell Grant increase and the upturn in financial aid requests, including some that are positive, such as more students from low-income families opting for college. But there is widespread concern among financial aid officers interviewed for this article that layoffs and declining home values, coupled with rising prices of food and gas, have led more people to seek aid either out of true need or understandable anxiety about the future.

Increases in Federal Financial Aid Applicants, by State

State of Residence 2007-08 2008-09 Percent Change
Nevada 54,077 65,773 21.6%
Arizona 180,511 211,347 17.1%
Florida 656,567 762,385 16.1%
Georgia 408,084 467,553 14.6%
North Carolina 330,192 373,708 13.2%
California 1,301,104 1,468,314 12.9%
Oregon 141,239 159,138 12.7%
Virginia 267,426 300,596 12.4%
Source: U.S. Education Department      

In North Carolina, where Duke is based, the number of financial aid applicants surged 22 percent -- the fifth highest increase in the country during that period.

The largest increase came in Nevada, where applicants grew by 32 percent, or 9,968 students.

Unlike Duke, which can draw upon a large endowment to meet 100 percent of financial need, other institutions with more limited resources are scrambling to deal with the increased demand for aid. Take Santa Clara University, a Jesuit college in Silicon Valley that expects to have about $4 million in unmet student need this year, even though the financial aid budget was increased by $2.5 million.

“The unfortunate bottom line is it will never be enough, because the needs are getting extensive now,” said Richard Toomey, financial aid director at the university. For students who have trouble getting institutional aid or federally subsidized loans, higher interest private loans may be the only option.

"We see a lot of the student loans, more than I'm comfortable with," said Katrina Lee, financial aid director at Mount Olive College, a private liberal arts school in North Carolina. "It bothers me how much debt these kids are going to have when they get out."

Some students are simply turning to more affordable options altogether. At Anne Arundel Community College, in Maryland, financial aid officers say they’re seeing students who had intended to go to four-year universities opting instead for community college.

“When they finally got the bill from that school, they couldn’t pay it,” said Richard Heath, director of financial aid at Anne Arundel.

Students who apply for federal aid must first fill out the Free Application for Federal Student Aid, commonly abbreviated as FAFSA. At Anne Arundel, FAFSA applications increased by 14 percent during the first half of 2008 compared with the same period last year, according to the U.S. Department of Education.

An individual student can send a FAFSA form to multiple institutions, so a spike in applications at an individual college does not necessarily mean the college will have a corresponding increase in enrolled students with demonstrated need.

Trend Extends to Grad Programs

Increases in financial aid interest are not limited to undergraduate programs. Eve Traube, financial aid director at the New York College of Podiatric Medicine, said she’s seen several recent cases where students who are nearing graduation are now applying for aid for the first time.

“What I’m seeing now, which I haven’t seen [before], is students getting into their senior year and parents calling up and saying ‘we no longer have the resources available,’ “ Traube said.

According to federal data, the New York college saw only a modest 3-percent aid application increase in the first half of 2008. But Traube said a number of aid requests are made at the college after June, and the current federal count would not include those applications.

It’s not just parental support that’s drying up. Maryann Dudas, director of financial aid at Seton Hill University, in Greensburg, Pa., said graduate students who used to be able to count on employer contributions no longer have such assurances. M.B.A. programs, for instance, were commonly covered by employers in past years. Not anymore.

“They’re cutting back benefits,” she said. “They are cutting back to save money.”

Florida, Georgia See Big Increases

In a sure sign of the times, some notable increases in aid applications actually escaped the attention of financial aid officers. That’s because the process is significantly more automated now than it was just a few years ago at some institutions, where it was once common to spend months processing an individual student’s paperwork.

Jay Mooney, associate director for financial aid at the University of Georgia, said he hadn’t noticed the 10 percent increase in applications at Georgia until Inside Higher Ed inquired about it.

“That’s a noticeable number as far as looking at data, so I think we’re starting to see some of the economic impact here,” Mooney said Wednesday. “And, of course -- depending on what’s happened in these past couple of days -- we may see a lot more.”

Indeed, the federal data do not account for the latest news from Wall Street, where government bailouts appear have failed in the short term to allay concerns about the fragile global market.

The states of Georgia and Florida saw some of the biggest surges in financial aid applicants in the country. Florida had a 26 percent increase, the second largest in the nation, and Georgia followed just behind with a 25 percent increase. Both states have large merit-based scholarship programs for college-bound residents, but neither program requires FAFSA applications to be filled out to qualify.

The University of Georgia has also seen an 11 percent increase this year in the number of students eligible for Pell Grants, a shift Mooney called “pretty significant, especially for us.”

As resources become scarcer for students, there will be increasing pressures for places like Georgia to expand need-based offerings with institutional dollars, Mooney said.

“It could definitely prompt a good conversation about it,” he said. “And, in fact, at the University of Georgia the conversation is happening at the highest level.”

 

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