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How Much Are FAFSA Delays Impeding Yield?

Episode 201

June 25, 2024 35 minutes


EAB’s Brett Schraeder hosts a conversation with Bill Hall, the founder and President of Applied Policy Research, Inc. The two discuss the impact of the FAFSA delays on this year’s enrollment figures and examine the extent to which admissions teams may still have financial aid levers they can pull to boost yield for the fall. They also talk about how APR will be working together with EAB’s Financial Aid Optimization team in the months ahead.


0:00:03.8 S1: Hello and welcome to Office Hours with EAB. Today we look at how the new and improved FAFSA, or more to the point, the delays around its implementation are impacting enrollments. Our experts share what they’re seeing and hearing from admissions leaders and discuss whether these teams still have any financial aid leverage they can pull that might make a difference for the fall term. So give these folks a listen and enjoy.

0:00:44.1 Brett Schraeder: Hello everybody, and welcome to the Office Hours with EAB. My name’s Brett Schrader, and I manage the financial aid team here at EAB. And among many things that we do for colleges, we really help colleges understand how pricing and financial aid fits into student decision making and enrollment and revenue. And anyone listening to today’s podcast knows that the most recent enrollment cycle has really been a challenging one. It’s been plagued by the chaotic and probably contentious rollout of the better FAFSA. And I hope that it will become the better FAFSA here in the, in the next year or two. But, but for this year, it’s been a real challenge. So, one of the things we want to talk about today is just what the, now that we’re in June and we’ve passed most institutions, either regular deadline or extended deadline, just what happened this year.

0:01:46.1 BS: And then if there’s anything that colleges can do over the next several months to make sure they land in a decent spot for the fall. And we may even talk a little bit about what’s ahead in the future. With me today is, Bill Hall, who is the founder and president of Applied Policy Research it, a firm that has been in the revenue management and financial aid optimization space for many decades. Some of you may know that, and we’ll get to this after the end of the podcast, but Bill and APR have decided to merge with EAB as of this July. So we’ll talk a little bit about that at the end, but very excited to have Bill with me. Welcome Bill, and maybe just give us a brief history of your life in this world of enrollment management.

0:02:47.2 Bill Hall: Thank you Brett. And for those of you who are listening, Brett and I have had these conversations, not to talk about the past of APR, but to talk about where we’re going together, almost daily over the last number of weeks and months. And so I’m very pleased that both myself and the entire full-time staff of APR as of July 1st will be joining EAB, will be a part of the financial aid optimization division. Brett had mentioned that we have quite a long history in enrollment management generally, the field of net revenue management is the way we’ve characterized the work that we do, because it involves a lot of budgetary related work, and a lot of interaction with those in the finance area of higher education as well as those in the enrollment management area.

0:03:35.7 BH: But my firm was founded in Minneapolis, Minnesota, which has some of the roots for EAB’s financial aid division. We are here just across town from one another. We were founded in 1986, and I founded this after a stint I did as the policy director for the Minnesota Higher Education Coordinating Board, which at that time was responsible for coordinating everything within higher education that related to the flow of federal funds. So we had a lot of work with student loans and with the early development of the Pell Grant program. And I joined a division that needed to revamp its formula for distributing state grants, having done work in retention and a lot of other issues related to student progress at the University of Minnesota where I did my graduate work in psychology.

0:04:29.7 BH: But we were a part here in Minnesota of what was called the high tuition high aid movement that occurred in many states in the 1980s, and had developed already a good, strong and robust Minnesota State grant program. And we revamped it to achieve a closer integration with the Pell Grant. So the Pell Grant and Minnesota State Grant working together have a broader reach than the Pell had had in the past, and the Minnesota grant intensified the positive impact that the Pell Grant was having on the highest need students, and then extended a little bit further into middle income, which is very much a theme of this year.

0:05:08.3 BS: Absolutely.

0:05:08.4 BH: So Minnesota Shared Responsibility Model, was something that was in the bones of everything that we did as I founded APR in ’86. And we began working exclusively with private colleges. And we took our knowledge of the way in which federal and state money integrated one with another to get into the whole range of work with financial aid optimization. Our goal was to provide exceptional customer service to campuses. And for me, at that time, that meant a relatively small footprint. So we have always been one of the smallest sized organizations within this higher education realm. And we’ve always done a lot of really intense work and customization. What I found is, as we’ve looked, now during the course of these last couple of years where more and more campuses, first of all in the post-COVID era, are required to go through the RFP process, our channels of marketing were very much word of mouth. And that’s, for a small organization meant that we had a regular success rate of bringing in new clients to replace other clients and to stay a relatively small firm.

0:06:24.9 BH: But what we found is increasing RFPs, were asking that we offer much more, and the much more is what we found in the larger firms, and obviously one of those that is a premier firm to offer a broad range of enrollment management is EAB. So at the end of last calendar year, we began serious conversations and conducted them throughout the winter, toward the goal of having a firm that was small, focused on customized service, and joining a larger firm that has the same philosophy as we have, provide services to campuses so that you can do the best job of shaping the class and using financial aid to achieve your enrollment goals, but also to make sure that enrollment goals included a goodly number of students who could not otherwise afford a more expensive campus, in particular when we’re talking about private institutions without adding substantial institutional aid to what is there by way of federal and state aid.

0:07:19.0 BS: Excellent. Thank you.

0:07:21.3 BH: So that’s a bit of the background. My team has already been working regularly to be sure we’re integrating the data that we have historically into the data flows that are there. One of the great advantages that I see in what we’re going into is dramatically greater development of the technology platform at EAB. And that includes a lot of comparative data within cohorts. Ours are at most dozens of students, dozens of institutions against which we can compare. We’re now talking about being a part of a comparison group that is well over 200 institutions of many more types of institutions, including public institutions for our comparisons that we’re able to provide to campuses in the future.

0:08:02.4 BS: That’s great, Bill. I love the history, and you and I are both fortunate to have worked in and live in states that have pretty good support for higher education, California and Minnesota, some of the better State grants. So hearing some of the history of that was super helpful and fun to relive a little bit. So let’s switch over to this year. It’s been a year, I think, and it’s been a tough year and it continues to be a tough year. What are some of the just high-level headline things you’re seeing, now that we’re a little bit past most students’ decision date even though we still have some schools adding students as we go, but what are some high level takeaways you’ve seen this year, Bill?

0:08:50.2 BH: Okay. Brett, you and I have both had opportunity in this last two weeks to be conducting you characterize it as a summit, we characterize it as our client seminar, in this usually second week in June. And so we both have had an opportunity to do a substantial amount of review of where we stand at this still relatively early stage in the closing of the class. I think for most years we’ve got a good view with many of our clients of what their class is going to be. But it’s very much still in process. But what we know already from this year is that essentially we were operating within a context in which we were expecting substantial assistance and encouragement for students to get more intensely involved in the financial aid process because they were simplifying the FASFA, and we were expecting to be on a timeline that has been set to substantial activity in the fall as of the adoption of Prior-Prior numerous years ago.

0:09:57.0 BH: So we started out the year with some perspectives of what we were expecting and delays were among the things we expected, because obviously if you’ve been through any governmental work as I had, you know that things always take more time when government is involved, and that when you’ve gotta be making sure you’re addressing what are the expressed concerns as you go along the process of those who are involved. So we were operating in the context of a year in which we were doing some nominal sticker price changes for our recommendations for most of our clients were operating in a period of time in which we were not necessarily expecting a dramatic increase in applications or admits for most of our clients. And we did indeed, especially in the early fall, we found that it was a good early start, good flow of applications and particularly those that were involved in early decision were making some good size decisions about early decision.

0:10:58.7 BH: And we found the flow of information through our admission processes was going along well. Obviously, we knew then by the end of summer that delays were already in play, as the announcement was made that the official FAFSA release date was going to be the 31st of December, and we wouldn’t start to see data flows until late January. So with that information in play, we began to revise our own expectations for what it is we were gonna have as what we would characterize as truly actionable applications where we are combining ISIR data with everything we know about the students from the admissions process and make our decisions as to what we’re gonna be doing with respect to the financial aid offers. So our admitted student head count for our clients was about steady for this year. But the admitted filer count was down almost 20%. So among our admitted.

0:11:54.0 BS: FAFSA filer, you mean. FAFSA filer count?

0:12:01.0 BH: The filer count, yes. And that was more than the NCAN’s results were suggesting by about the time that we logged that near 20%, they were at 13 to 15%. So we experienced a drop in filers. And we have no expectation that we’re going anywhere near close to where that is. One of the things we are experiencing is a continued flow week after week of additional access coming through. We do know that the timeline is such that we haven’t even been able to have financial aid offices engage in the professional judgment process. So there are any number of things that are gonna be delayed even into later June.

0:12:42.1 BH: So, 13.5 is the national average that we logged at the beginning of May, and we were close to 20. But what we were finding is that of those who were filing the FAFSA, we essentially were finding the proportions were about, as we expected, in that a larger proportion of students were in an SAI range that qualified for more aid in addition to the other criteria on which students could be awarded at a minimum or a maximum Pell. So, those were additional features that influenced the way things have gone this year.

0:13:19.4 BS: And Bill, just for our folks who aren’t enrollment people, SAI is Student.

0:13:25.8 BH: Student Aid Index is the new version of what previously had been the Expected Family Contribution.

0:13:31.1 BS: Great.

0:13:31.8 BH: And we can go into that a little bit, I think with one of the further topics that we wanna have, if would wanna be transitioning to that yet at this time, Brad?

0:13:40.7 BS: Yeah. That’s a helpful perspective on this year. I would say we saw in the EAB partner set, very similar kind of trends. We saw a very slight uptick in admitted students. So I would say essentially flat, similar to the APR institutions. And, in the end, our partners were down about 15% in FAFSA filers, but that was split with private partners being down closer to 18, 19%, which was very similar to the APR private partners. And then Publics being down about 12% in FAFSA filers. So, I think our number is very consistent with yours. And right now our partner base is sitting at about a couple percentage points behind on the deposit numbers comparatively year over year, but there’s a wide swath there. We have some that are doing quite well and are up a little bit.

0:14:34.2 BS: We have many that are 8, 10, 12, 15% behind as well. So, the numbers together look okay, a just a little behind, but broadly look a little more challenging. So I would reiterate those things. But yeah, that’s a good segue to talk about SAI, you mentioned more students being Pell eligible, which was we both, I think, feel like that will be a good thing and hopefully will continue to be a good thing. What other shifts did you see this year that you expected or anything come up that was maybe a little unexpected other than the continued delays?

0:15:19.5 BH: Yeah. When I mentioned that we’re reaching our expectations in terms of what’s going on within the Pell distribution, we still haven’t reached the level of ISIRs that have come through. So we’re looking both at the rate and we’re looking at the numeric dimension of this. What’s the headcount that we have to deal with? So we’re finding that within our range of ISIRs that we receive, the proportional increase expansion is there, but that doesn’t mean that PELL yet in this year, in the 2024 year is, or is likely to be as impactful as we had hoped. So what we’re finding is if we’re looking at our distribution across the Student Aid Index across what used to be the EFC, below the median we’re coming in with weakness where we expected strength. We expected strength in the areas where the Pell was going to be expanded.

0:16:12.4 BH: And we were also hoping that we were gonna be having a larger max Pell and the max Pell stayed steady from the 2023 fall to the 2024 fall. So I think a lot of what might have happened to give us a, I think, a greater overall impact on outreach to students, a larger proportion of students choosing to go on to college in their first year, choosing to go onto some form of post-secondary education. I don’t think we’re gonna be seeing that this year. And that’s why we say, as we’re talking, as a theme for our gathering here this week, realizing the potential of the new FAFSA is something that we consider a multi-year process and a work in progress that is not gonna be achieving its full results. We’re also seeing a slightly lower discount rate than we expected. And this has to do with that lesser concentration in that intermediate need area, which we’ve been looking forward to the arrival of the new Pell, because the new Pell was gonna be reaching out into that area that from a financial aid perspective, it’s oftentimes the most expensive one to serve, as you’re running out of Pell Grant, running out of state grant and need to be supplementing a relatively high need population with a lot of institutional money.

0:17:28.1 BS: Yeah. Those are excellent takeaways. I think we’ve seen a lot of the same, definitely pushing the distribution of students a little more toward that full Pell Grant. And then on the other side, we’ve seen a little bit more increase in the proportion of students on the higher SAI side, but not as many in that, just below median to median area. So I think that’s a great highlight and definitely something we’re seeing in the data. And actually, probably, yeah, I agree with you a little surprising that the discount rate has hung a little lower than it was last year and a little lower than maybe we modeled. So I think that could ultimately be a good win, even for schools that are a little behind on the enrollment.

0:18:14.4 BS: That they may come out with revenue that works for them. And that may be something that we want to highlight as well. Question, Bill, and then we can talk about revenue here in a minute ’cause I want to do that as well. But in terms of maybe what you see as next year, what we thought was maybe a one year, realizing the full potential now maybe a two or even three year, realizing the full potential, what are some things maybe in the short term that you’re seeing? And then maybe just a quick second. It’s always hard to predict the future, but maybe what could be challenges or opportunities for the fall 25 cycle?

0:19:00.0 BH: Well, I think the short-term is a continuation of something that really was a high point for this year and I know Brett you and I had a discussion of the extent to which, how well do we think our partners have done this year in terms of responding. And there was a tremendous outpouring of enthusiasm in the midst of all of the frustration for tackling the challenges that were there. And what that meant is, I think, better collaboration between the admissions operations and financial aid operations, because in the midst of our inability to deliver all the money, we had to be delivering something that was comparably important. And I know Brett, I’m recalling a webinar that you did in January, where you said what our partners need to do is distinguish themselves by the quality of the customer service and the customer service quality was constant communication.

0:19:52.8 BH: So I think among the things that are still operating now, I’m seeing references in our financial aid leveraging meetings where we’re by and large talking about discount points and yield points, is the emphasis on what we’re doing by way of campaigns to continue communication, particularly for campuses that still have a shortfall from what their goals are for the year and believe that unlike many years, they may still have more potential in the summer, so they’ve gotta be sure that that’s communicated. But we find that many of our teams are involvement management teams, the spirit among the personnel is very high because of good collaboration one to another. What we also have attempted to do this year is to handle a lot of the communication with senior management, and that is to be sure that where we have the opportunity we can explain, this is among the most challenging years, and for me, in nearly 40 years of work in and around the financial aid area, this is the most challenging year that I’ve seen, ever.

0:20:54.2 BH: And it surpasses the challenge of the COVID first years. And clearly, the one thing that I’ve been watching by way of statistical trends is since 80% of our clients fairly quickly moved their deposit deadline to June 1st, so we had a quick turnaround of data from June 1st to be able to conduct our summits. These last couple of weeks, to be able to be sure we picked up the June 1st trend, our deposit trend matched the trend for those that felt delayed in the Fall of 2020, the deposit deadline to June 1st. In some cases, it exceeded that, which meant those strong communication campaigns had students who were waiting and then they were told and now is the time, if you have not yet gotten through the process, get through the process, we can turn it around relatively quickly, and they did. So we had the long delay in being able to deliver the need based aid, and then we had at times a near vertical slow pop or something that I had never seen occur displayed in the process.

0:22:00.2 BH: And it was heartening, but also then to know this was a result of then amazingly hard work, even harder work day after day, and what was going on really in the process.

0:22:10.8 BS: Yeah. Those are great points, and I would underscore that communication tactic, and I would echo all of that, and I really, I think kudos to all of our enrollment teams for just being as on top of this as they possibly could be. One of the things that’s been on my mind is the summer as it relates to communication, bills will be, not Bill Hall, but bill, financial bills will be going out here over the next several weeks, some schools in this week or next week, and some through the month of July and even into August, and I think the need for communication with students and parents is gonna continue to be very high. Would you agree with that?

0:23:00.0 BH: Absolutely. There is still a lot for them to understand the message that we’ve had up until this point is, an offering of the early financial aid that we could do, which almost invariably for our clients was to realize if they were gonna be delays, which we expected two to three months, not four to five months, emphasize the quality of your merit aid. So while we do a good balance, I believe in our advice on what to be allocating for need based on what to be allocating for merit, merit being the down payment for what will be a larger overall award amount when the student demonstrates their need. That helped us. We were communicating a lot about, this is a downpayment. When we see what your level of need is, know that we have money in reserve, we’re not lacking for an ability to fill our goals with respect to what we’re doing with the need-based aid. So continuing to do that.

0:24:00.6 BS: That makes total sense. And I think one thought I’d just love your perspective on… And then I’d love to circle back to that merit-need needs me conversation because I think that tends to be not as easily understood by some folks. But the backing up a step, as we look into the fall, I’m hopeful that the FAFSA that will be back on a more regular October 1 timeline. I know the NAFSA conferences starts this Sunday, and there’s been some speculation that maybe the FAFSA that won’t be ready, particularly if Congress makes any changes to the FAFSA and NAFSA today put out some statement about what they would like to see changed in terms of some of the FAFSA elements and some of the questions. And I know that’s a difficult balance because of the… Any time you make a change that means more programming and more potential for delays. Are you hearing anything from your partner’s bill or just any thoughts on what the fall might look like?

0:25:10.0 BH: First, statistically, I’d say this one is a flip of a coin. So we’re emphasizing 50/50. We are aware that there could be slight delays in the 2025 FAFSA filing and processing, but we wanna watch for and build on any opportunity for early momentum. And that means we’ll communicate quickly with students, this is a different year, this is a year in which we will be able to do what we’ve done previously in our categorical aid, most normally merit aid and need based aid in the fall. So the Prior-Prior year is still in place, we wanna be sure we’re doing as much as we can to get you to a net price, understanding what it’s really gonna be costing for us.

0:25:54.7 BH: So with the hearings that occurred back in early May, a bipartisan group of leading lawmakers in the House and Senate sent secretary Cardona a letter, outlining their concern that the aid application cycle for the next academic year will face similar issues. In the letter the lawmakers including those in charge of the department’s purse strings requested weekly updates on the timetable for the FAFSA beginning in June as well as a list of errors or issues with the form by July 8th.

0:26:23.1 BH: And I think among the things that we were critical of, those of us who work with them regularly, was delay at almost every stage in facing up to what actually was happening so that we could be building it into our expectations. So by September 9th, lawmakers wanna see a better version of the online application. Secretary Cardona has said in multiple hearings, he expects the form to be ready on October 1st, but has yet to detail what the department plans to do differently to ensure a smooth launch.

0:26:52.7 BH: So I think we still are dealing with the same governmental processes, but I think it was demonstrated to most of us once we got the last of the errors, which was the IRS resolved, there was a pretty good surge of information coming to us with the ISIRs. And while it didn’t fulfill our highest expectations earlier in the process, I was expecting a fall off simply because many students now had their choice set reduced to a relatively small number, if they were starting at this process, they may ready be down to one or two rather than three to five or more.

0:27:28.9 BS: Absolutely, yeah.

0:27:31.4 BH: So obviously, all the higher education organizations have weighed in basically saying they are concerned, they are making sure the Department of Education knows that there has been damage done to our enrollment that is not just going to be for one year, but likely from multiple years if we can’t bring students back into the process, if indeed they say, this is certainly not the year for me to be starting. With that note as well, we have a consistent down-tick in the expectations from polling of the students going immediately onto college. And we were hoping after leveling off that we were gonna be seeing a boost this year, again, I think if everything had been going according to plan, I think many of these statistics would go from slightly negative to slightly positive.

0:28:15.1 BS: Absolutely, yeah, that’s helpful. Thanks for all that context. And we hope they’ll be promises kept by the Department of Education to get things moving forward. One, let me shift gears a little bit and talk about just the work that we do. And I think if you ask the average person on the street, they might ask you, what is it exactly is this net revenue or financial aid optimization work or merit the need, and how does all this stuff fit together. And I know a lot of times the headlines really are driven by the most exclusive schools in the country who don’t live in a space where there’s financial pressure and they have to pay the bills, and they have to pay their faculty and they have to keep the lights on, and they don’t have huge endowments to do that. And so I think the reality is for us, Bill, is always that balance of… You’re trying to enroll a class that also brings in some tuition revenue and also auxiliary revenue, so you can keep the organization going, and I think sometimes people view that as maybe detrimental to say, high need students or those things.

0:29:36.5 BS: And I can certainly say in my experience of doing this for 30 years, and I’m curious if you have the same, is that largely the conversations we have are about just balancing all of the needs of the institution. And revenue is one of those needs, supporting students who cannot afford much in the way of paying for their education is one of those needs, supporting different majors and diversity and gender balance, and all of the different things are always conversations we’re having. So when you’re at a cocktail party or you’ve got someone outside of the APR or who doesn’t understand this, how do you explain this to them and what’s your take on the supporting of these institutions and what they need to continue and survive? I always say we’re a much better place in the United States with these institutions existing than not existing, and so that’s one of the things we try to help them do, is to stay thriving.

0:30:40.6 BH: Well, I go back to my history with this, I was a counseling psychologist in training at the University of Minnesota, when the student affairs vice president, with whom I had worked closely on a number of research projects on retention, and basically put forward the proposition that we needed to be thinking more about support for students in order to achieve the goals that he for sure had for an institution that had a predominantly white population. So I think I go back to a time where I was looking at how financial aid can be used to be sure that we do support needy students, and we increase the socioeconomic diversity of a population which would otherwise then be vastly more affluent than it is today within our post-secondary institutions.

0:31:34.8 BH: So I think the starting point is, when we began work on revamping the Minnesota State Grant, we eliminated the scholarship component from the state perspective. In other words, it only became need-based, and then we made sure we moved it in the direction as the various iterations of need analysis, leading to congressional methodology, and then federal methodology. For those of you who don’t deal with, the federal methodology is the name of the methodology that we had that produced the EFC, it is still federal methodology to the best of my knowledge.

0:32:06.2 BH: That’s one thing they didn’t change, but now the Expected Family Contribution is being spent the Student Aid Index. So I always use that then as a readily available evidence of what’s the wealth or the financial wherewithal of the family. And that we had to be sure that we were making sure that everyone was served. And that doesn’t mean you just change financial aid so that you shift it only to the needy. In this case, with our state grant program, we did do more for those with higher levels of need, but with a much more liberal criteria that was there for the Pell Grant at the time. But I’m aware with the EFC to SAI conversion, we’ve gotta take a look at how we’re serving students at each level of the SAI. And one of the changes that occurred was that the SAI for upper income families rose. By and large, our recommendation to our clients is, until you see that these families have an ability to pay that and a willingness to pay that, do not elevate the expectation from the family as high as the rising SAI is being produced. So we are trying to shape the class, we are trying to be sure there’s reasonable support for students at all income levels, and I said for two years, we can’t wait for the Federal government launch a Pell initiative.

0:33:26.8 BH: So many of our clients launched special initiatives to put more money into what was likely to be the range where the Pell was going to be increasing, so that we can see what the impact might be of stronger awards off the edge of the Pell distribution. You can do whatever you might choose to do, it’s a matter of what the mission is that the institution and for those of us would provide support, I know your philosophy is the same as mine, but tell us what you want to achieve and we will give you various ways in which you can achieve it.

0:33:57.3 BS: I think that is a fantastic end point to the conversation. I think you can see why we are very excited about the merger of EAB and APR, we’re gaining a team with Bill and his team that will be joining us here in a couple of weeks. That really, we feel strongly about, and I think of both of our decades in this are well aligned and so you’ll hear a little bit more about the APR and EAB merger, but let suffice it to say, we’re excited for many reasons around this. And I think the conversation today probably gives you reasons why. So looking forward to continued conversations, Bill. And thank you everyone for joining the EAB podcast this week.

0:34:48.0 BH: Thanks for this opportunity, Brett. And we’re very excited too about the work we’ll be doing together ahead.

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