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Delays in processing financial aid applications could threaten the credit or viability of small private colleges that serve students who are low income or come from underrepresented groups, Fitch Ratings warned in an alert Wednesday.
The Free Application for Federal Student Aid delay is one of several factors that are increasing financial pressures on these colleges, Fitch analysts wrote. Other changes include the Biden administration’s plan to make more employees eligible for overtime, a new process for mergers or acquisitions, and the Supreme Court’s decision this past June to end race-conscious admissions.
The Education Department has said it will start processing completed FAFSAs soon and begin sending students’ information to colleges by the middle of this month—which is months later than usual. The delay in processing has pushed back deadlines for when students need to commit to a college. Experts worry that issues with the rollout of the FAFSA could deter some students from enrolling in higher education.
“For colleges that are almost solely dependent on student-generated revenues, this enrollment uncertainty is wreaking havoc on their already tight budget planning for the upcoming fiscal year,” Fitch analysts wrote in the alert. “For colleges that suffer enrollment losses, even marginal, one-time disruptions in producing a robust incoming freshman class will dampen finances for several years.”
FAFSA submissions from high school seniors are down by 42 percent, according to the National College Attainment Network.
Fitch analysts wrote that the fallout from the FAFSA launch “will be felt unevenly within the sector.” They don’t expect institutions considered academically selective, or those with lower costs, to experience much of an impact.
