Chaos plagued financial-aid process. How the government botched the rollout.

The Education Department was already more than a year behind schedule on rolling out the new Free Application for Federal Student Aid.
The Education Department was already more than a year behind schedule on rolling out the new Free Application for Federal Student Aid.

Summary

The U.S. Education Department was already a year behind in rolling out the new Fafsa application for financial aid for college—and then someone realized the new formula didn’t account for inflation.

The Education Department was already more than a year behind schedule on rolling out the new Free Application for Federal Student Aid. Then, last October, staffers were alerted to a major oversight: The formula for determining aid didn’t account for inflation.

The system had to go live in December. But the inflation adjustment was mandated by law, and the Education Department was facing mounting criticism that students could lose out on crucial financial aid.

By early December, the Education Department began planning to make the update, but work still didn’t begin in earnest for a few more weeks.

The delay, which hasn’t been previously reported, exemplifies the troubled effort to overhaul the Fafsa, which serves as a gateway to billions of dollars in college scholarships, grants and loans. Chaos reigned in the months leading up to the launch, and the system was plagued with glitches and data errors once it went live.

The impact has been devastating, delaying the timeline for students to commit to colleges and deterring some from applying for scholarships at all. The Education Department has received more than 9.7 million forms so far, down 13% from a year ago.

The problems were plentiful, a Wall Street Journal investigation has found.

Among the largest failings: The government opted against hiring an outside manager to coordinate the sprawling project, after underestimating how tough it would be to revamp the Fafsa system. More than a dozen times, the Education Department issued memos fixing its own prior instructions to contractors.

The assignment

The bipartisan effort to simplify the Fafsa was decades in the making, spurred by complaints from students, families and colleges about the onerous process.

But the overhaul was daunting.

That is partly because the aid system is built in Cobol, a programming language that dates to the 1950s. And to make its aid determinations, Fafsa pulls information from a dizzying number of agencies, including the Social Security Administration, Internal Revenue Service and the departments of Justice and Veterans Affairs.

In June 2019, the Government Accountability Office flagged it as among the 10 systems most in need of modernization.

Congress passed the Fafsa Simplification Act in December 2020, slashing the number of questions on the form and expanding eligibility for certain grants. In early 2021, the Biden administration pushed the rollout back by one year, citing challenges with the ancient technology.

It posted the main contract solicitation in August 2021, and General Dynamics Information Technology got the award—valued at as much as $142 million—in March 2022.

A lack of coordination

The Education Department referred to the project as “the most ambitious and significant redesign" of the aid process and eligibility formulas since the Reagan era.

GDIT worked alongside a handful of vendors including Accenture Federal Services and Peraton. But no single contractor was tracking all the moving parts. That role, known as a systems integrator, was kept in-house—a rare approach on something this complex, people familiar with the contracting process say. The contractors referred questions to the Education Department.

The department regularly added tasks to contractors’ to-do lists, according to a person familiar with the project. GDIT received more than 100 of these requests, some of which could add weeks to the timeline. The department sometimes assigned different technical specifications to each contractor—so even if they all did their parts right, the different sections of the system weren’t compatible, this person said.

An Education Department official said laying out all the instructions at the outset was “not feasible in a project of this size and complexity," and that it is standard practice to make adjustments along the way.

Roughly three weeks before the Fafsa was launched this past winter, the department awarded a $4 million systems-integrator contract to a company called Jazz Solutions. An Education Department official acknowledged that the agency could have assigned that role sooner.

In late 2022 the Education Department alerted the White House that it was behind schedule for an October 2023 launch. The Office of Management and Budget dispatched the U.S. Digital Service, a team of product managers and engineers created after the disastrous Healthcare.gov rollout. They tried to shepherd things back on track, including making sense of the order in which the Education Department expected parts of the project to be completed.

The Government Accountability Office said in a summer 2023 report that it found “critical gaps" making the project’s schedule and cost estimates unreliable.

In years when the system works as intended, the Fafsa goes live on Oct. 1. The Education Department uses information submitted on the form to determine how much a family should be able to afford, and what federal grants and loans they are eligible for. They send those details to schools, which often add their own scholarships and tell families the final price. Students then compare costs before making enrollment decisions in the spring.

In early 2023, under growing pressure from financial-aid officers, the Education Department acknowledged publicly that it wasn’t going to meet the Oct. 1 deadline. It set a December target instead.

A frenzied—and underfunded—fall

Annual funding for student-aid administration has remained at roughly $2 billion for the past three years—a decrease, after adjusting for inflation.

Last year, Democratic senators unsuccessfully asked the appropriations committee to give the department an extra $620 million—and warned of dire consequences if the money didn’t come through.

In addition to the Fafsa overhaul, the Office of Federal Student Aid was returning tens of millions of borrowers to repayment after the pandemic pause and changing the set of companies that service those loans.

“Each of those would have been one of the most challenging projects for FSA in years, maybe a decade. We were doing all three within six months, and without additional funding," said James Kvaal, undersecretary of education.

Critics say the department was further distracted by rolling out new loan-forgiveness programs, a charge U.S. Education Secretary Miguel Cardona has rebutted.

Representatives from the U.S. Digital Service, contractors and the Education Department set up a command center at GDIT’s Falls Church, Va., headquarters to make the final push to the December launch.

But a new series of problems cropped up. Once the Education Department gave the order to integrate inflation adjustments into aid calculations in January, it announced that it wouldn’t actually be able to start processing aid forms until at least early March.

The delay pushed back the delivery of student records to schools, which in turn affected their schedules for making aid offers. Many still can’t estimate how much tuition revenue they will have in next year’s budget or how many beds will be full come fall.

Unresolved issues

Problems continued through the spring. Some families were locked out of the Fafsa form once they started. Others were erroneously told they didn’t sign it. Still others were in limbo for months, waiting to make corrections.

One of the main selling points of the new Fafsa—pulling tax information directly into the form—turned into its biggest headache in early April, when the Education Department said about one million students whose forms were already processed might get incorrect aid offers because of faulty data provided by the IRS.

The Education Department reprocessed them all.

A Treasury Department official said the IRS tested the tool with the Education Department ahead of time and continues to review the situation.

By mid-May, the Education Department listed 21 outstanding issues with the Fafsa form or submission process. Some had workarounds but not complete fixes; a further 22 were resolved.  The Education Department said nearly all applicants can now submit the form and receive aid offers quickly.

The Government Accountability Office is pursuing two investigations, with reports expected in the fall.

An Education Department official said the agency is conducting a review of its contracts and procedures, including holding vendors accountable for performance issues. But for now, it is still primarily focused on getting students to apply for aid.

Write to Melissa Korn at Melissa.Korn@wsj.com

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