Personal Finance
Freshmen college enrollment falls; FAFSA failures to blame, experts say
Fewer high school students pursued a four-year degree this year, new research shows. That’s largely because of last year’s botched rollout of the Free Application for Federal Student Aid, experts say.
The number of 18-year-old college freshmen sank 5% this fall compared with last year, with four-year colleges notching the largest declines, according to a new analysis by the National Student Clearinghouse Research Center.
The declines in first-year student enrollment were most significant at four-year colleges that serve low-income students, the report also found. At four-year colleges where large shares of students receive Pell Grants, first-year student enrollment sank more than 10%.
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“It is startling to see such a substantial drop in freshmen, the first decline since the start of the pandemic in 2020 when they plunged nearly 10%,” Doug Shapiro, the National Student Clearinghouse Research Center’s executive director, said in a statement.
‘Aftermath of the FAFSA fiasco’
Experts had warned that problems with the new FAFSA would result in fewer students applying for financial aid and fewer students enrolling in college.
“Freshman enrollment dropped by a dramatic 5% this fall in the aftermath of the FAFSA fiasco, reversing previous gains,” said higher education expert Mark Kantrowitz.
Last year, 45% of college applicants reported frustrations with the process and 12% said they ultimately chose a community college, technical school or other alternative because of their FAFSA experience, according to Jenzabar/Spark451′s college-bound student survey. The higher education marketing firm polled more than 5,400 recent high school graduates in September.
Submitting a FAFSA is one of the best predictors of whether a high school senior will go on to college, according to the National College Attainment Network. Seniors who complete the FAFSA are 84% more likely to enroll in college directly after high school, according to an NCAN study of 2013 data.
“FAFSA completion and college enrollment move in the same direction — that relationship is pretty consistent,” said Bill DeBaun, NCAN’s senior director.
“We remain committed to helping students get the financial aid they need to pursue a college education and are thankful for the guidance counselors, financial aid professionals and the network of organizations and individuals who dedicated tremendous amounts of time, energy, and expertise to navigate this year’s college and financial aid application processes,” a spokesperson for the U.S. Department of Education said.
The Supreme Court‘s ruling against affirmative action was also “a likely contributing factor,” Kantrowitz said.
The affirmative action ban may have especially impacted the enrollment of underrepresented minority students at the most selective colleges, he said.
Although freshmen enrollment declined across all racial groups, at highly selective colleges the differences were striking: White enrollment fell by 5% and Black enrollment plummeted 16.9%, the National Student Clearinghouse Research Center found.
Some of these students may have enrolled in Historically Black Colleges and Universities or minority serving institutions, Kantrowitz said, “others may have shifted enrollment to community colleges, which are lower cost, due to delays in receiving financial aid offers.”
‘This is not a blip’
Because the FAFSA serves as the gateway to all federal money, including loans, work-study and grants, FAFSA completion rates are also an indicator of students’ intent to re-enroll, particularly among low-income undergraduates, according to DeBaun.
But even though the 2025-26 FAFSA opened ahead of schedule with only minor issues, it will be harder to reach students from the Class of 2024 who opted out of college this year. “When you miss the immediate transition, it does decrease the likelihood of the enrollment down the line,” DeBaun said.
And, increasingly, rising college costs and ballooning student debt balances are causing more students to question college’s return on investment, DeBaun said. “This is not a blip, this is a big setback.”
More students qualify for federal aid
The new Free Application for Federal Student Aid was meant to improve access by expanding Pell Grant eligibility to provide more financial support to low- and middle-income families.
As a result of changes to the financial aid application, more students now qualify for a Pell Grant, a type of aid awarded solely based on financial need.
Recent data from the Department of Education shows that 5% more students are receiving federal financial aid and more than 13% more students are on track to receive Pell Grants this year.
But overall, the number of Pell Grant recipients is down significantly. In fact, the number of Pell Grant recipients peaked over a decade ago, when 9.4 million students were awarded grants in the 2011-12 academic year, and sank 32% to 6.4 million in 2023-24, according to the College Board, which tracks trends in college pricing and student aid.
Also, those grants have not kept up with the rising cost of a four-year degree. Currently, the maximum Pell Grant award rose to $7,395 — after notching a $500 increase in the 2023-34 academic year.
Meanwhile, tuition and fees plus room and board for a four-year private college averaged $58,600 in the 2024-25 school year, up from $56,390 a year earlier. At four-year, in-state public colleges, it was $24,920, up from $24,080, the College Board found.
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Nearly 2 million federal student loan borrowers who’ve requested to be in an affordable repayment plan are stuck in a backlog of applications, waiting to be approved or denied, according to new data recently shared by the U.S. Department of Education.
The Education Department disclosed the information in a May 15 court filing in response to a legal challenge lodged by the American Federation of Teachers. The teachers’ union sued the Trump administration in March for shutting down access to income-driven repayment plan applications on the Education Department’s website.
IDR plans cap borrowers’ monthly bills at a share of their discretionary income with the aim of making their payments manageable.
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In late March, the Trump administration made the online applications available again, and said that it pulled the forms because it needed to make sure all repayment plans complied with a court order that blocked the Biden administration’s new IDR plan, known as SAVE, or the Saving on a Valuable Education plan.
Trump officials argued that the ruling had broader implications for other IDR plans, and it ended up removing the loan forgiveness component under some of the options.
The backlog complicates things for borrowers as the Trump administration restarts collection activity. The Education Department estimates that nearly 10 million people could be in default on their student loans within months.
Without access to an affordable repayment plan, student loan borrowers can be suspended on their timeline to loan forgiveness and at risk of falling behind and facing collection activity.
‘The opposite of government efficiency’
In the May court document, the Education Department disclosed that more than 1.98 million IDR applications remained pending as of the end of April. Only roughly 79,000 requests had been approved or denied during that month.
Consumer advocates slammed the findings.
“This filing confirms what borrowers have known for months: Their applications for loan relief have effectively been going into a void,” said Winston Berkman-Breen, legal director at the Student Borrower Protection Center.
The Center said that if the Education Department continued to move at its current rate, it would take more than two years to process the existing applications.
AFT President Randi Weingarten called the backlog “outrageous and unacceptable.”
“This is the opposite of government efficiency,” Weingarten said. “Millions of borrowers are being denied their legal right to an affordable repayment option.”
What’s behind the backlog
A spokesperson for the Education Dept. blamed the backlog on the Biden administration, saying that it “failed to process income-driven repayment applications for borrowers, artificially masking rising delinquency and default rates and promising illegal student loan forgiveness to win points with voters.”
“The Trump Administration is actively working with federal student loan servicers and hopes to clear the Biden backlog over the next few months,” they said.
The Biden administration put the student loan borrowers who’d enrolled in its new IDR plan, SAVE, into an interest-free forbearance while the GOP-led legal challenges to the program unfolded. Many of the currently pending IDR requests are likely from borrowers who are trying to leave that blocked plan to get into an available one.
Sarah Sattlemeyer, a project director at New America and senior advisor under the Biden administration, said that the current backlog began last year “and has existed across both the Biden and Trump administrations” as a result of the legal battle over the SAVE plan.
“It is a demonstration of how complicated the loan system is, how much uncertainty there has been over the last few years and what is at stake,” Sattlemeyer said. “There also isn’t clarity around how some applications in the backlog should or will be handled, such as those where a borrower chose an option that no longer exists on the application.”
In recent months, the Trump administration has terminated around half of the Education Department’s staff, including many of the people who helped assist borrowers.
That is also likely one reason why so many of the applications haven’t been processed, said higher education expert Mark Kantrowitz.
“Perhaps the reduction in staff is affecting their ability to process the forms,” Kantrowitz said.
The Trump administration’s resumption of collection efforts on defaulted federal student loans has far-reaching consequences for delinquent borrowers.
For starters, borrowers who are in default may have wages, tax returns and Social Security payments garnished.
But involuntary collections could also have a “spillover effect,” which puts consumers at risk of falling behind on other debt repayments, according to a recent report from the Federal Reserve Bank of New York,
As collection activity restarts, disposable income falls
“We were obviously somewhat concerned about potential spillovers to delinquencies on other types of debt,” the New York Fed researchers said on a press call earlier this month.
“During the period where people were not required to make payments on their student loans, they could have used that money to pay their credit card bills and auto loans,” the researchers said. “Now they have to make these payments again on their student loans, so that could put pressure on their ability to pay these other loans.”
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The U.S. Department of Education’s crack down on student loan repayments could take billions of dollars out of consumers’ pockets, reports show. Monthly collections on defaulted loans may reduce disposable personal income between $3.1 billion to $8.5 billion a month, according to research by JPMorgan.
“Part of the reason that some people are adding to credit card debt is because they have student loan payments — that’s the spillover effect,” said Ted Rossman, senior industry analyst at Bankrate. “Something’s got to give.”
‘It’s just money that can’t go to other financial things’
Until earlier this month, the Department of Education had not collected on defaulted student loans since March 2020. After the Covid pandemic-era pause on federal student loan payments expired in September 2023, the Biden administration offered borrowers another year in which they would be shielded from the impacts of missed payments. That on-ramp officially ended on Sept. 30, 2024, and the Education Department restarted collection efforts on defaulted student loans on May 5.
Whether borrowers face garnishment, or opt to resume payments to get current on their loan, that’s likely to have a significant impact on their wallet.
“It’s just money that can’t go to other financial things,” said Matt Schulz, chief credit analyst at LendingTree.
After the five-year pause ended and collections are resumed, the delinquency rate for student loan balances spiked, the New York Fed found. Nearly 8% of total student debt was reported as 90 days past due in the first quarter of 2025, compared to less than 1% in the previous quarter.
Currently, around 42 million Americans hold federal student loans and roughly 5.3 million borrowers are in default, according to the Education Department. Another 4 million borrowers are in “late-stage delinquency,” or over 90 days past due on payments.
Among borrowers who are now required to make payments — not including those who are in deferment or forbearance or are currently enrolled in school — nearly one in four student loan borrowers are behind in their payments, the New York Fed found.
As borrowers transition out of forbearance and into repayment, those borrowers may also face challenges making payments, according to a separate research note by Bank of America. “This transition will likely drive delinquencies and defaults on student loans higher and could have further knock-on effects for consumer finance companies,” Bank of America analyst Mihir Bhatia wrote to clients on May 15.
In a blog post, the New York Fed researchers noted that “it is unclear whether these penalties will spill over into payment difficulties in other credit products, but we will continue to monitor this space in the coming months.”
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