In the last few days, there has been a significant amount of confusion and alarm over a new announcement from the Trump Administration, one which canceled all disbursement of federal grants and loans. This created more than a little confusion and worry among many different groups. We are not qualified to speak to all of these; we are not lawyers nor legal experts. What we are is experts in the college admissions process, and this too was impacted.
There was an immediate panic from students and parents when this announcement came out, as many worried that this would extend to federal financial aid funding, right as payment was coming due for spring semester. It seems that this isn’t happening, as the Education Department announced that student loans and Pell grants would still be disbursed as normal. This still leaves many parents and students in a state of confusion and worry however. What’s going on with funding, and is this something you will need to keep worrying about?
In this article, we’re going to unpack what’s happening, and what you need to be aware of for admissions and college funding going forward. This is an evolving situation, so things may change; we’re going to give you the most up-to-date information we can.
What’s Happening With Federal Funding?
The Trump administration ordered a freeze of federal disbursement of funds on Monday the 27th, with exceptions for Social Security and Medicare. The purpose of this was to review what these funds were being spent on, and to ensure that this aligned with the priorities of the administration. The Department of Education later clarified that this did not apply to their aid, since it was being disbursed directly to students, through both the Federal Pell Grants and student loans.
The Department of Education is expected to compile a full report on this funding by February 6th, however, and submit it to the administration for further review, to see if it aligns with their policies and priorities.
A judge has just blocked the implementation of this funding freeze, as the legality of the action is under review. We are not lawyers, especially not constitutional lawyers, and will not wade into the muddy legal waters of how the federal government actually works here. We do expect that this is just the first of many judgments, rulings, and arguments to come from this decision however.
As it stands, federal education funding is currently proceeding unabated, and students will be able to access their grants and loans for the spring semester. That said, this seems to be just the first step in a much larger dance, and what lies ahead may be more uncertain.
What’s Next for Federal Education Funding?
As we said in the title, FAFSA isn’t cancelled yet. Two key priorities of the Trump Administration are cutting federal spending and shutting down the Department of Education however, so this is likely not to be the last word on this. In this section then, we’re going to look at some possibilities for how this plays out going forward.
We’ve written before about what the Department of Education actually does, and how their actions impact students in both high school and college. Shutting this down would throw all of that into confusion, but does not automatically end the grant and loan programs it administers. There have been proposals that these may be transferred to another branch of government, perhaps Treasury, and be administered from there.
This latest proposal, however, raises questions about the continuation of this funding at all. There are several ways this could unfold, with varying levels of impact on students and parents.
The first, and simplest, is that nothing changes. That this is all bluster, and things continue on as they have before, perhaps with a slightly leaner Department of Education monitoring things. This would probably lead to longer processing times and more bugs in the FAFSA form, but would otherwise leave students relatively unaffected, at least for the moment.
Another possibility is that the Department of Education itself is shut down, but that student aid funding is administered by another government agency. This would likely create a significant period of confusion while the transfer happens, and may result in students not getting the aid they need in a timely fashion. This could also impact significant other aspects of the student experience, but would not hit funding itself as directly.
Next there’s the option that the Department of Education remains, but with a significantly decreased budget. This would impact both what it operates, and potentially the amount of aid it could administer, and how that aid is administered. This could impact you in small and large ways, from decreased funding for high schools, to the cancelling of Pell Grants, to student loans now having higher interest rates or smaller grace periods.
The final option is the most extreme, where the Department of Education is shuttered and its programs entirely done away with. This would be the end of FAFSA, federal Pell Grants, and federally administered loans. Students would have to turn to private lenders to fill the gaps, which would be an additional financial burden. These private lenders often charge higher interest rates, and do not have the same forbearance and forgiveness options as federal loans.
It is uncertain which of these will come to pass, as the fights over the legality over all of these actions may see processes start and stop and lurch in various directions before anything is firmly settled. Indeed, the White House has rescinded the original funding freeze memo, but insists the order is still in effect. We are still not lawyers, and will not try to decipher the odds of how this will play out in courts. Instead, our focus is on how all of this will impact the students we’re working with.
What Does the Funding Freeze Mean for You?
For now, at least, not much, at least in terms of how it will impact your immediate ability to pay for college. Department of Education loans and grants will continue to be disbursed, and FAFSA looks set to continue this year as intended. That said, what is true today might not be true tomorrow, especially as this new administration seeks drastic changes at the federal level.
Going forward, students are likely to need to look for additional sources of aid funding, and this can become tricky. The federal government supplies the vast majority of aid for students, and is the primary reason why many can afford colleges. This currently comes in three forms:
- Direct grants, most notably Pell Grants, though other direct education benefits exist, these are by far the most widespread.
- Work study funding. While universities have their own work study programs as well, these are often significantly subsidized by the federal government.
- Loans. These are the biggest source of funding, both subsidized and unsubsidized loans by the government are what allow a significant percentage of students to afford colleges.
If these dry up, students will need to look towards other sources of financial aid. The most common currently used are:
- Institutional aid. These are financial aid grants supplied by colleges themselves, though as some face a budget crunch, their ability to continue this level of funding becomes uncertain.
- State aid. Some states have their own budgets for financial aid. These are far smaller than the federal budget, and only apply to public colleges within the state. The size and generosity of these funds varies significantly by state though, and are only available to students in the state.
- Independent scholarships. There are hundreds of different independent scholarships, run by third-party organizations, which offer scholarships to students. Most of these are rather small, and have varied requirements. We expect these to get much more popular if federal aid is cut.
- Private loans. Due to caps on the amount of money students can borrow from the federal government, some students already make use of private loans to bridge the gap. These are going to grow the most in use if federal funding is cut, because nothing else has the resources to bridge the funding gap that will exist.
Overall, we expect students to require more financial support from other sources, and for the cost of college to be far more of a concern. This is especially the case as the cost of college keeps rising year by year, with no end in sight.
Unfortunately, all students can really do from this point is keep an eye on the news, and stay abreast of developments as they happen. We recommend not panicking, but making some preparations now can help down the line. If you are still in high school, and think you may need help in paying for college, begin looking at how different colleges award financial aid, and what funding strategies will work best for your situation.
Final Thoughts
The headlines around the aid cancellation have been more than a little alarming, and the panic many students and parents are feeling is completely understandable. Hearing that you may suddenly need to come up with tens of thousands of dollars because FAFSA funds aren’t coming through is a situation nobody wants to be put in, and will cause more than a little tension.
We hope this article was able to explain what’s going on with the situation, and calm any frayed nerves. The situation isn’t fully resolved of course, but there is no need for students to be in an immediate state of panic.
Of course, trying to pay for college is always stressful, even when federal policy isn’t rapidly changing. If you are looking for help with this or any other aspect of your college admissions, schedule a free consultation today. We have an in-depth understanding of scholarship strategy, and are able to help families with their unique situations. If you are concerned about affording our program, apply to our pro bono Laurel Scholars program. Either way, we look forward to hearing from you!
