Why High School Students Left $2.3 Billion in College Aid on the Table

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The high school class of 2017 left as much as $2.3 billion in federal grant money for college on the table, according to a new analysis by NerdWallet.

The grant money went unclaimed because students did not fill out or complete the Free Application for Federal Student Aid (FAFSA), which is key to accessing financial aid for college, including federal, state and institutional money.

Federal aid includes Pell grants, which are awarded to undergraduate students from low-income families. Unlike student loans, Pell grants do not have to be repaid.

In recent years, the Pell grant program has come under scrutiny for its role in allegedly contributing to college tuition inflation.

Former U.S. Secretary of Education William Bennett asserted in what would become known as the Bennett Hypothesis that the availability of federal loans — particularly subsidized loans offering a below-market interest rate and payment of interest as long as the student is enrolled in school — provides “cover” for colleges to boost prices, because students can offset a price increase, or at least a portion of it, with federal loans.

In his report “Does Federal Financial Aid Drive Up College Prices?” Donald E. Heller, dean at the College of Education of Michigan State University, characterizes the findings of the studies that have attempted to measure the veracity of the Bennett Hypothesis as ambiguous. Some studies find a relationship between Pell grants and tuition increases; others do not.

Since the economic recession that began in December 2007, federal financial aid has increased. The College Board reported that in the 2010-11 academic year, 9.1 million students received Pell grants, representing 36% of all undergraduates that year, an increase from 25% in 2007-08, according to the Heller report.

NerdWallet said the maximum Pell amount for the 2017-18 school year is $5,920.

NerdWallet said it found that in the 2016-17 academic year, 1,234,249 high school graduates didn’t fill out FAFSA. NerdWallet determined that 648,191 of these grads would have been Pell eligible. The average amount of money left on the table per eligible high school graduate who didn’t apply was $3,583, according to NerdWallet.

Other findings by NerdWallet included the following:

  • 36% of high school students did not fill out FAFSAs.
  • 49% of all high school students were eligible for Pell grants.
  • Utah and Alaska had the highest percentage 2017 graduates who didn’t complete the application — 55% and 50%, respectively.
  • The lowest percentage of incomplete FAFSAs among high school graduates was 17% in Tennessee, followed by Delaware (28%), and Mississippi and Massachusetts (29%).