There is no end in sight to the financial woes at the U.S. Department of Education’s Office of Federal Student Aid (FSA). FSA needs funds to carry out crucial services, including processing the Free Application for Federal Student Aid (FAFSA) and overseeing the $1.6 trillion dollar student loan program. Unfortunately, the agency is starved for funds.

Years of stagnant funding have limited FSA’s ability to carry out its basic duties, including helping students and families navigate the financial aid program and repay their student loans. Proposed funding cuts in last year’s budget left FSA stretched at a time that they are in need of additional funding in order to orchestrate the return to student loan repayment after a three-year payment pause. And at the moment, Congressional budget negotiations continue to dominate headlines, stoking fears about government shutdowns and compounding concerns about the Department of Education’s ability to successfully oversee the return to student loan repayment. These concerns are valid, because inadequate funding in this year’s budget would imperil the Department of Education’s ability to implement new products, provide much-needed customer support, and ensure that their infrastructure is adequate to meet user demands.

As Congress races to meet the next government funding deadline, they must provide the additional resources that FSA needs to support student borrowers and their families. Congress should also fund FSA at $2.7 billion in alignment with the Department of Education’s needs and the Biden administration’s proposed fiscal year 2025 budget.

Tight Budgets, Huge Deliverables

As is becoming all too common, the House passed a Continuing Resolution, narrowly averting a government shutdown in February of this year. On March 8, 2024, the Senate approved a stopgap funding bill to keep part of the government open until March 8 and the other part until March 22. Appropriators released a full-year $1.2 trillion government funding bill for the remaining six agencies, including the Department of Education, negotiated by the Biden administration and Congressional leaders from both sides of the aisle on March 21 to fund the federal government until the end of the fiscal year on September 30. The Further Consolidated Appropriations Act of 2024 provides flat funding in the form of a $24.6 billion appropriation to Federal Student Aid programs, equal to fiscal year 2023. While the Biden administration submitted its fiscal year 2025 spending request on March 11, a split Congress means items in the President’s Budget are unlikely to become law. This includes a continued commitment to increase FSA funding support.

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In recent years, Congress has not seen fit to increase funding for the agency, even as calls for heightened data transparency and collection necessitate technological advancements and other new expenditures by the Department of Education. During fiscal year 2023, FSA operated on an annual administrative budget of approximately $2 billion. The Biden administration’s budget for fiscal year 2024 sought to increase funding for the Student Aid Administration by $620 million over the 2023 level. The president’s newly released budget for fiscal year 2025 requests a $625 million increase over the fiscal year 2024 annualized Continuing Resolution level.

The additional funding would support improvements in student loan servicing oversight and the department’s digital infrastructure. In addition to completing planned technological upgrades, FSA must improve student loan servicing through modernizing digital infrastructure and strengthening borrower support, using the funding allocated in the Student Aid Administration account, to relieve the growing strain on working-class students and borrowers.

Despite being stretched thin, FSA continues to prioritize student aid funding and processing while attempting to stand up new initiatives. In fiscal 2023, FSA provided approximately $114.1 billion in federal grants, loans, and work-study funds to more than 9.7 million postsecondary students. This is a crucial service particularly for low and very low-income students who rely on Pell Grants and other resources to make their college dreams a reality.

Failed FAFSA Roll Out Indicative of System-Wide Problems

Congress’s failure to fund FSA at adequate levels has directly contributed to a troubled FAFSA rollout that has complicated families’ pursuit of college, with potentially catastrophic effects.

From students and families to guidance counselors and college administrators, everyone involved in FAFSA completion depends on FSA resources. Federal Student Aid offers technical assistance to financial aid administrators and the institutional staff responsible for managing an institution’s participation in federal student financial aid through Title IV. All of these groups make up the continuum of support for students and families through the FAFSA completion process. The FSA website also provides information via frequently asked question landing pages, chatbots, and virtual assistants that enable users to get answers to basic questions. FSA also provides a Federal Student Aid Estimator that students and families can use to determine how much federal student aid they may be eligible for.

On December 30, 2023, the Department of Education unveiled an updated and streamlined FAFSA form. This new form is the culmination of years of advocacy aimed at making the process of applying for financial aid easier and faster. The introduction of a new FAFSA also comes at a time when more and more states are introducing universal FAFSA graduation requirements. Prior to the new FAFSA roll out, advocates worried that low-income students were leaving much needed aid on the table simply because they did not complete the FAFSA form. Many argued a simpler FAFSA form could remove a fundamental barrier to receiving aid and enrolling in a post-secondary program. The less time-intensive application requires students and their guardians to consent to the transfer of IRS data into the form.

However, the release of the new FAFSA came nearly three months later than in prior years. As of late January, half as many FAFSAs had been completed as would be typical. This later launch date for the new FAFSA form created further problems, as the resulting high website traffic led to difficulty accessing the form, leaving many prospective borrowers stuck in a “waiting room.” (These challenges were reminiscent of an earlier FSA website crash, when thousands of borrowers attempted to apply for debt relief under President Biden’s cancellation plan—which, in the end, was struck down by the Supreme Court.) Because of these delays, families’ financial aid eligibility information were not sent to colleges until the first half of March, presenting a huge problem for financial aid officers, who use the information to build financial aid packages for prospective students; these students, in turn, often rely heavily on the size of aid packages when deciding which school to attend. As a result, many university associations, advocacy groups, and member organizations are now pressing colleges and universities to delay their “decision day” enrollment deadlines to allow students sufficient time to consider aid when choosing a school.

Making matters worse, other updates intended to simplify the FAFSA application process have resulted in undue hardship, particularly for students from undocumented or mixed-status families. Students and their guardians must provide an electronic signature to complete their applications, and the Department of Education must verify the authenticity of electronic signatures. However, verifying the identity of undocumented parents can be difficult, which can delay or prevent the family from completing a FAFSA, putting students’ federal aid in jeopardy.

Had Congress provided FSA with the funding it needed from the outset to build and test the new form, these issues may never have arisen. Looking forward, additional funding could support FAFSA outreach for these and other issues serving to drive completion rates. FSA could also utilize direct funding to more quickly develop consumer-tested tools that promote Pell eligibility as required by the FAFSA Simplification Act.

Stepping Up Servicing

In addition to funding to address problems in the rollout of FAFSA, the Department of Education needs additional funding to strengthen oversight of student loan servicing at a pivotal moment when the loan repayment environment is undergoing massive transformation.

FSA is in the midst of its NextGen project, a multi-year effort intended to “modernize the student aid experience” by addressing many of the technology and operations challenges borrowers and students face when trying to repay their student loans. The NextGen Project would update the data management system used by student loan servicers and introduce a new loan servicing platform for all federal student loan borrowers. Just last year, FSA awarded new contracts to five student loan servicers to modernize and enhance loan servicing. The project also includes enhancing the FSA website’s functionality. NextGen is intended to represent the culmination of the systems upgrade the Department of Education has been working toward for nearly a decade. Once fully optimized, it will provide all federally managed borrowers with account management capabilities on the FSA website. One component of NextGen is the Unified Servicing and Data Solution (USDS) modernization project, which is supposed to address errors and delays related to the transfer of student loan accounts between loan servicers. FSA must complete these modernization projects all while operating on a shoestring budget.

While FSA is modernizing, it is also managing unprecedented complexity in the loan repayment landscape. The Department of Education has canceled more than $143 billion in federal student loan debt for nearly 4 million student loan borrowers since 2021, and is operating four separate income-driven repayment (IDR) plans while also navigating the post-pandemic return to repayment. To ease borrower transition back into repayment, FSA must be able to allocate more resources to loan servicing. While data suggests the majority of borrowers have managed to successfully navigate return to repayment, nearly one-quarter of borrowers anticipate missing at least one scheduled payment. By and large those borrowers who have already missed payments reported their monthly payments being unaffordable at this time or an inability to connect with their servicer. Borrowers have reported service interruptions, lengthy call center wait times, confusion about eligibility for the various income driven repayment plans, and in some cases, misinformation from servicers about their repayment obligations. Equally troubling is the fact that a number of borrowers have seen the loans reinstated following errors calculating their time to forgiveness. These mounting troubles have included allegations of servicer misconduct and mismanagement, including the failure to send timely billing statements during the earliest phase of return to repayment.

Loan servicers play a crucial role in the student loan system, but recent budget cuts have resulted in the suspension of some loan servicer oversight, including modifications to the service level agreements servicers must abide by. At present, borrowers submit complaints on, which are then routed to servicers. Once received, the servicer attempts to resolve the complaint, and if the borrower is unsatisfied with the response—as is the case when complaints are closed without an appropriate resolution—they can escalate their concern to the FSA Ombudsman Group. The FSA website makes clear the Ombudsman Office is a last resort for borrowers when customer service avenues are unable to provide assistance. One reason why cases may not be satisfactorily closed is due to the costs associated with high-touch training. When FSA conducted train-the-trainer sessions regarding the limited Public Service Loan Forgiveness (PSLF) waiver they were effective but came with high financial and personnel costs.

Borrowers Deserve More Accessible, Easier to Understand Information

Thanks to the variety of loan repayment plans, norrowers experiencing economic hardship now have options for making their payments more affordable, but this has made the repayment landscape much more complex and many borrowers can easily become overwhelmed by the process. Borrowers need more and better information about their options so they can be empowered to make the best decisions for their family’s financial health, yet FSA currently is not provided with the necessary resources to meet this need.

FSA’s primary responsibility is to help borrowers manage their outstanding student loans and collect repayment, but it also manages programs intended to support borrowers who cannot afford to pay their monthly bill. Income-driven repayment loan forgiveness and loan discharge plans offer viable pathways to debt relief for millions of borrowers. The success of IDR as a debt alleviation program depends on the ease of application, income verification and recertification and how well it’s administered. FSA develops the policies and procedures for administering the programs and oversees the loan servicers who implement them. Because servicers handle billing and assist with providing information about repayment options, they play a crucial role in how borrowers experience the enrollment and application process.

Unfortunately, servicers have previously faced fines and criticism for making misrepresentations to students about their options for repayment. More recently, borrowers have received incorrect billing statements and in some cases had their loan forgiveness reversed as a result of servicer miscalculations and other errors. All of these incidents result in a severe mistrust of servicers and student loan lending in general. The need for accurate information is paramount in a student loan system rife with complexities. The introduction of new IDR plans such as Saving on a Valuable Education (SAVE) helped make debt relief a tangible reality for millions but increased the number of plans with varying eligibility criteria and benefits borrowers needed to understand. Parent PLUS borrowers dialing into call centers seeking information on loan consolidation so that they can qualify for IDR and Federal Family Education Loan (FFEL) borrowers wanting to know when and how to take advantage of the IDR payment count adjustment—which expires in Spring 2024—need real time answers they can rely on.

Another vulnerable group in need of additional informational support in repayment are defaulted borrowers. As of December 2020, some 8.2 million borrowers defaulted on a Direct or FFEL Loan. More than one-third of these borrowers are in what should be their highest earning years between ages 35-49. Unfortunately, these older millennials and late Gen Xers, who have survived multiple recessions and a global pandemic, continue to struggle in repayment. Just as borrowers of different ages experience default differently, so too do borrowers of different racial identities. Black and Latino borrowers experience default at a disproportionate rate when compared to their white counterparts. Economic precariousness among student loan borrowers of color was widespread even before the COVID-19 pandemic.

Fortunately, the Biden administration has enacted a new initiative intended to support borrowers struggling in repayment. Defaulted borrowers now have access to temporary relief through Fresh Start, a program that extends some automatic benefits to any borrowers in default. These borrowers receive access to federal student aid, collections relief, credit reporting changes, loan rehabilitation, and eligibility for other government loans but the automatic benefits expire on September 30, 2024. Borrowers who enroll and use Fresh Start to get out of default will see their defaulted loans return to in repayment status, have the default removed from their credit report and have their defaulted loans transferred to a loan servicer. The need for borrowers to proactively enroll in Fresh Start to access the most generous benefits including access to IDR and PSLF is an obvious barrier for hard to reach borrowers and makes access to information about the program and its approaching deadline that much more important. Immediate relief may soon be available to borrowers at high-risk for default through newly proposed regulatory text, but without clear eligibility criteria, borrowers are sure to have questions and complaints about who will receive a waiver of debt.

More Money, More Results

The Department of Education also needs additional funding for improved data collection and reporting. Ongoing discussions about the economic value add of college have prompted demand for more information on postsecondary outcomes, particularly as they relate to student loan repayment.

The department currently collects data from schools that get federal aid and makes much of this information available to the public online via the FSA Data Center. In addition to data on school eligibility and participation in Title IV programs, the Data Center provides public access to data on student loan default rates and loan forgiveness. Despite the wealth of information available, the FSA Data Center could provide even more reporting, if it had the resources to do so. Additional funding would support the collection and dissemination of data on borrowers who had their balances canceled through PSLF, including their demographics, institution types, loan types, and details on their employment. More data on student loan disbursements by program including total quarterly amounts and amounts by loan type would help researchers track the growth of loans such as Grad PLUS and understand the degree type and level of education these loans are financing. This additional data could be used by current and prospective students and their families, advocates, and researchers to compare institutional outcomes, and by policy makers to help shape federal policy and communication strategies.

In addition to website updates and data collection improvements, additional funding for FSA can support stronger oversight and improved protections for students. For example, FSA’s Enforcement Unit needs adequate funding to support investigations in deceptive recruiting practices and other illegal conduct, and FSA’s Program Review Unit needs resources to monitor and take action where institutions fail to comply with FSA’s standards. Robust consumer protection can also come by the way of technical assistance to institutions of higher education about everything from reporting 90/10 revenue percentages to responsibilities and requirements for institutions that enter into contracts with third-party service providers.

FSA also needs adequate funding in order to provide practical consumer assistance support to students and to support borrowers mired in student loan debt, including the nearly 4 million parent PLUS borrowers. FSA also needs adequate resources to respond to borrower inquiries and complaints related to Title IV schools and student loan issues. Appropriators must prioritize the needs of hard-working students and borrowers by allocating adequate funding to the Student Aid Administration.

Looking Ahead

Despite being woefully underfunded, FSA has continued working to meet the moment for students and families who rely on the office’s services. More adequate support would allow FSA to fulfill its mission, make necessary improvements, and plan for the future. Students and families across the income strata need an easy and reliable FAFSA experience to understand their eligibility for aid. The delays and frustration these families experience when systems are inadequate have real world consequences on their ability to finance a degree and achieve their higher education goals. If the enacted funding levels mirror those in the fiscal year 2025 budget request, FSA will be able to achieve advancement and transformation in loan servicing, digital infrastructure, and financial aid administration. Millions of students and families are already struggling to make ends meet while paying for college or repaying their student loans. Robust investments in FSA can help ensure shared economic prosperity and security for all families who engage our higher education system.