• Enrollment of first-year college students is down from a year ago, particularly at four-year schools that serve low-income students, according to a new report.
• Although more students are eligible for federal aid this year, problems with the new Free Application for Federal Student Aid, along with rising college costs and ballooning student debt balances, are still major concerns.

More students are eligible for federal financial aid, but fewer high schoolers are pursuing a four-year degree. Increasingly, college is becoming a path for only those with the means to pay for it, many studies show. 

"We know there's still work to do and people out there that need financial aid," James Kvaal, Under Secretary of Education, told CNBC.

Although undergraduate enrollment is up overall, the number of new first-year students sank 5% this fall compared with last year, with four-year colleges notching the largest declines, according to an analysis of early data by the National Student Clearinghouse Research Center.

"It is startling to see such a substantial drop in freshmen, the first decline since the start of the pandemic," Doug Shapiro, the National Student Clearinghouse Research Center's executive director, said in a statement.

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"But the gains among students either continuing from last year or returning from prior stop outs [or temporary withdrawals] are keeping overall undergraduate numbers growing, especially at community colleges, and that's at least some good news," he said.

The declines in first-year student enrollment were most significant at four-year colleges that serve low-income students, the report also found. At four-year colleges where large shares of students receive Pell Grants, first-year student enrollment plummeted more than 10%.

More students qualify for federal financial aid

The new Free Application for Federal Student Aid is meant to improve access by expanding Pell Grant eligibility to provide more financial support to low- and middle-income families.

As a result of changes to the financial aid application, more students can now qualify for a Pell Grant, a type of aid awarded solely based on financial need.

New data from the Department of Education shows that 10% more students are on track to receive Pell Grants this year, including 3% more current high school seniors.

"School districts, college access groups and college financial aid offices worked with us overtime to help students get financial aid and get through the FAFSA, and that is bearing fruit," Kvaal said.

But overall, the number of Pell Grant recipients is down significantly. In fact, the number of Pell Grant recipients peaked over a decade ago, when 9.4 million students were awarded grants in the 2011-12 academic year, and sank 32% to 6.4 million in 2023-24, according to the College Board, which tracks trends in college pricing and student aid.

Federal aid is not keeping up with costs

Also, those grants have not kept up with the rising cost of a four-year degree. Currently, the maximum Pell Grant award rose to $7,395 — after notching a $500 increase in the 2023-34 academic year.

Meanwhile, tuition and fees plus room and board for a four-year private college averaged $58,600 in the 2024-25 school year, up from $56,390 a year earlier. At four-year, in-state public colleges, it was $24,920, up from $24,080, the College Board found.

Experts have continuously warned that ongoing problems with the new FAFSA have resulted in fewer students applying for financial aid, which could also contribute to declining enrollment.

"The changes from FAFSA simplification were supposed to increase the number of Pell grant recipients. This was before all of the chaos ensued," said higher education expert Mark Kantrowitz.

"We know there are still people out there that need help to get financial aid," Kvaal said. "The bottom line is we are going to keep working until everyone has the financial aid that they need."

Last year, 45% of college applicants reported frustrations with the process and 12% said they ultimately chose a community college, technical school or other alternative because of their FAFSA experience, according to an exclusive look at Jenzabar/Spark451′s upcoming college-bound student survey. The higher education marketing firm polled more than 5,400 recent high school graduates in September.

Rising college costs and ballooning student debt balances are still a major concern, causing more students to question the return on investment, experts also say. 

"There is growing skepticism and paranoia about the value of a degree," said Jamie Beaton, co-founder and CEO of Crimson Education, a college consulting firm. 

Meanwhile, the number of students pursuing shorter-term accreditations is growing rapidly, with enrollment in certificate programs up 7.3%, according to the National Student Clearinghouse Research Center.

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