Congress May Not Increase Funding for FSA. Here’s Why That Matters.

• President Joe Biden initially proposed a 43% increase in funding for the Office of Federal Student Aid.
• Congress proposed level-funding the office, meaning its budget will remain unchanged in 2023.
• Some worry that such an action could force Federal Student Aid to abandon some initiatives planned for next year.

The Office of Federal Student Aid (FSA) has a lot on its plate in 2023, but it may have to make do without a funding increase.

On Dec. 20, the U.S. Senate put forth its proposal for a 2023 fiscal year spending plan, which includes increased funding for many higher education programs. It does not, however, invest more in FSA than in 2022, worrying some advocates that the country's primary student financial aid department may not have the resources to execute on a number of high-priority projects.

Karen McCarthy, vice president of public policy at the National Association of Student Financial Aid Administrators (NASFAA), told BestColleges that there is an overarching worry that FSA won't have adequate resources to tackle its long list of priorities.

We don't really have a lot of insight into how FSA is spending its money, McCarthy said. But we do know that they have a lot on its plate for the upcoming year.

The Road Ahead

McCarthy laid out a few of the issues FSA planned to tackle in 2023:

• Implementation of the new simplified Free Application for Federal Student Aid (FAFSA) form
• Resumption of federal student loan payments in July
• Planned overhaul of federal student loan servicing agreements
• New regulations for income-driven repayment (IDR) plans and the public service loan forgiveness (PSLF) program going into effect in July
• Ongoing debt cancellation saga and possible implementation

While the Department of Education (ED) has already processed many debt cancellation applications, if the courts allow the plan to proceed, FSA will still need to carry out those loan discharges, she said.

Plus, the end of the student loan payment pause will mark an unprecedented time for FSA.

We have never had all student loan borrowers go into repayment at the exact same time, she said. Ever.

It's unclear whether FSA will have the manpower to keep up with the likely flood of inquiries from borrowers when this happens. An increase in funding — like the 43% increase President Joe Biden initially proposed — could have lessened concerns.

FAFSA Simplification and Outstanding Questions

Higher education is also on the brink of the biggest change to the FAFSA form ever.

Congress approved the FAFSA Simplification Act in 2020, McCarthy said. It was originally slated to go into effect for the 2023-24 academic year, but Congress granted a one-year extension upon FSA's request.

Another extension is unlikely, she said.

Still, FSA has been slow to release details about the simplified FAFSA. McCarthy said FSA didn't release the new formula for federal financial aid until late 2022. Many in the financial aid community are still looking for answers to lingering questions about the new formula.

It's been an ongoing worry that ED and FSA have not released more training materials, considering the new FAFSA will go into effect within the next year.

We don't really know if they have enough financial resources to roll it out well, she said.