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Financial Planning > College Planning

What Financial Aid Changes Mean for Students and Colleges

By Michael S. Fischer

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On Oct.1, the U.S. Department of Education will introduce new rules regarding how and when the nation’s colleges award financial aid.

The rule changes appear to be a boon for college applicants and their families, while college admissions offices are scrambling to prepare for the changes, Cegment, a provider of college enrollment marketing technologies and services, reported Monday.

Cegment polled 1,031 high school seniors and their parents in early April, and 543 college professionals between March and May about how the changes would affect colleges and students and their families.

The Changes

Two procedural changes will go into effect on Oct 1, Cegment said.

The Free Application for Federal Student Aid (FAFSA) will be available for completion three months earlier than before. In addition, students applying to college for the academic year starting in fall 2017 will be able to complete the form using income and tax data from the 2015 calendar year, a full year earlier than in the past.

Cegment said the goal of these changes was to simplify the financial aid application process and give students a much earlier understanding of the affordability of each college under consideration.

Allowing students to file the FAFSA earlier and receive estimated or firm financial aid award letters up to six months earlier could cause important shifts in the timing of the traditional higher education enrollment cycle.

Here are the effects of key shifts:

  • The admissions application phase now coincides with the FAFSA phase, so students can know both where they have been admitted and what the associated financial aid packages are.
  • The timing of estimated and/or actual award letter delivery may now vary substantially by institution, enabling colleges to shape the preferences of prospective students much earlier.
  • Students will have much longer to decide which college they will choose to apply to and/or attend.
  • A longer college selection and deposit phase will increase the burden on institutions to nurture relationships with prospective students over a longer period of time.

“These changes will give students and families more time to plan and select a college with earlier and more complete information,” Cegment founder Craig Carroll said in a statement.

“College cost and financial aid eligibility will move even more to the forefront of the decision process, while colleges will be faced with an even longer admissions cycle than before.”

Colleges Respond

According to the survey, 69% of students and their parents expected to apply for financial aid, and more than two-thirds of these said it would be helpful to get an understanding of financial aid eligibility earlier in the college planning process.

Ninety percent of those intending to apply for aid said they would like financial aid awards earlier than the historical March award letter delivery, with 41% saying they would like to receive their firm financial aid award in the fall semester of their senior year.

According to the poll, cost was a major influence in the college selection process for three-quarters of those intending to apply for aid. Eighty-two percent said receiving earlier insight into their financial aid award would cause them to think more positively about a college.

How are colleges responding? Seventy-seven percent of enrollment professionals said they planned to deliver their financial aid awards earlier than in previous years.

Specifically, 69% said they would shift the timing of final financial aid, and 56% planned to provide earlier communication of pricing, aid eligibility and estimated award letters for prospective students. Forty-eight percent planned to implement both of these strategies.

Asked how the impending changes would affect their role with their institutions, 36% of college professionals polled said they felt “excited and invigorated,” 40% were “concerned” and 38% were “curious.”

Although most institutions appear to agree on the need to accelerate the delivery of financial aid insights, no clear consensus emerged in the survey about changes to their admissions timeline.

While more than half of the students and families said they wanted earlier admissions decisions, and more than a third of institutions had plans to shift admissions timing, a large percentage of institutions were not yet ready to move their admissions process earlier.

However, many planned to shift their admissions strategy in other ways. Half of respondents said they would engage prospective students more aggressively in their junior year, and a quarter said they would institute an early-decision or early-action program. College professionals said the two biggest obstacles to change were matters beyond their control: finalization of state aid awards, and finalization of Pell grant tables.

The shift to earlier aid and admissions by some institutions promises to increase the competition between colleges, according to Cegment.

Schools will be challenged to nurture the relationship with prospective students for a longer period. Some will allocate more attention to students between admission and deposit, during which students may be wooed by competitive offers.

Cegment found that 79% of what it called “non-selective” institutions were likely to make changes in the enrollment cycle in order to lure students away from highly selective ones. Seventy-three percent of “selective” colleges were also likely to make changes.

In contrast, only 53% of “highly selective” institutions said they were thinking about making significant changes.

How will these changes affect future enrollment cycles? Eighty percent of the respondents said institutions that fail to shift their admissions and financial aid cycle earlier will be at a competitive disadvantage relative to their peer institutions that do so.

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