Not filling out FAFSA cost students $2.9B last year

California students alone left nearly $4 million unclaimed

About $2.9 billion of federal student aid went unclaimed last school year because students did not fill out FAFSA, according to a new study from NerdWallet.

The report says 47% of America's high school graduates forfeited the opportunity to receive Pell Grant funds, but each could have received up to $5,645 for the 2013-2014 cycle.

Nationwide, 821,041 eligible students failed to complete the FAFSA, missing out on $2,955,475,413. Utah saw the largest rate, 40%, of qualifying students choosing not to apply for aid, while in just California alone, more than 100,000 seniors gave up a potential $396,401,205.

"I wasn't shocked when I saw the total number as much as I was shocked when I saw just the sheer number of students who weren't filling out the FAFSA," says study author Gianna Sen-Gupta.

Why are FAFSA rates so low?

The study follows a year of federal initiatives to simplify the 100-question application process, which can be nerve-wracking and complicated. Studies from Harvard University, Stanford University, and the National Bureau of Economic Research all show simplifying FAFSA increases low-income students' likeliness to pursue higher education.

Recently, the Education Department has streamlined the process a bit, allowing students to skip non-application questions when using the online version. But it still asks for information about families' income, savings, assets, and liabilities from the year before to calculate the amount they can be expected to pay. That number determines Pell grant and other aid eligibility.

More than 1M high school seniors don't fill out FAFSA. Is it time to simplify?

Advocates say a complete overhaul is necessary.

Former Sen. Tom Harkin (D-Iowa), prior chairman of the Senate education committee, sought to simplify the process by including in his Higher Education Act reauthorization bill a plan to let students reapply less often. 

Taking it even further, Sen. Lamar Alexander (R-Tennessee) and Sen. Michael Bennet (D-Colorado) introduced a bill that would shorten the process to just two questions:

  • "What is your family size;" and
  • "What was your household income two years ago?"

Shortening the application, regardless of whether it changes how much aid an individual receives, "could encourage people to apply for financial aid and potentially college," says Melissa Emrey Arras, director of education, workforce, and income security issues at the Government Accountability Office (Sen-Gupta, NerdWallet, 1/12; Imam, USA Today, 1/20).

The takeaway: Nationwide, 47% of high school graduates failed to complete the FAFSA last year, missing out on $2.9 billion in debt-free aid. Experts say simplifying the application process may increase participation rates.

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