The Old Capitol is a landmark at the University of Iowa and part of the official university logo. (Photo courtesy of the University of Iowa)

The Old Capitol is a landmark at the University of Iowa and part of the official university logo. (Photo courtesy of the University of Iowa)

Fewer Iowa high school seniors are applying for federal financial aid for the upcoming school year, indicating a potential drop in new enrollment at Iowa’s public universities, according to a new report from Iowa College Aid.

That could mean major financial trouble for Iowa’s public universities, which rely on tuition to financially sustain them.

Free Applications for Federal Student Aid (FAFSA) dropped for all potential college students. But the report shows fewer non-white and low-income students in particular are submitting applications as of May 31.

Prior to the COVID-19 pandemic and school closures, Iowa students appeared to be filing for FAFSA at higher rates than in the past five years, said Elizabeth Sedrel, spokesperson for Iowa College Aid.

That number tapered off March 16 when Iowa schools closed.

“Because we don’t know about fall enrollment numbers yet, these FAFSA numbers are our first indication of what trends might be in the fall,” Sedrel said.

As of May 31, 19,000 high school seniors filed FAFSA applications — about a 4% decline in comparison to previous years.

One reason for the decline was school closures. When schools went to online learning in the spring, it became more difficult for counselors to help students file for FAFSA.

The other reason for the decline is more high school seniors may be reconsidering attending college this fall, Sedrel said.

The COVID-19 pandemic has created instability, particularly for low-income and non-white students.

Seniors at Iowa’s public and private high schools who did not qualify for free or reduced lunch averaged  a FAFSA filing rate of 76%. In comparison, only 24% of low-income students filed an application, according to data from Iowa College Aid.

Additionally, more racially diverse high schools experienced lower FAFSA filings than majority-white high schools.

Seniors at high schools with 40% or less white students averaged around 30% FAFSA filings. Meanwhile, schools with 80% or more white students, which are the majority of Iowa high schools, averaged above 40% FAFSA filings.

Particularly for low-income students, the economic consequences of the pandemic are felt more deeply. Family members who lost jobs and planned to aid students with tuition may not be able to provide as much financial assistance. And students who need jobs to help them pay for school may also have a difficult time finding employment, especially on-campus, Sedrel said.

“When you’ve got a lower-income family, it’s taking a much larger percentage of their household income to send their students to school,” Sedrel said. “The loss of a job is going to cut into whatever money they’re contributing to a student’s education.”

However, data shows that one way to buck the disparities between low-income and wealthier students is through long-term supportive programming. Gear Up, a program offered through the state, starts working with students from low-income school districts starting in 7th grade to encourage them to attend college. Through junior high and high school, the program offers students support to prepare for college and also provides scholarship money.

Though there is still a gap between Gear Up students and higher-income students, Iowa College Aid still saw an increase in FAFSA filings from students in the program by 3% this year, despite the pandemic.

“They’re gaining on them, which is a really positive development,” Sedrel said.

What does this mean for Iowa schools and students?

A drop in FAFSA applications is concerning for Iowa’s universities as they rely on new enrollment and tuition to financially sustain, said Dave Swenson, an economist at Iowa State University.

Particularly as schools lose international and out-of-state students who pay full tuition, universities will be relying on incoming students, Swenson said.

But families may be more reluctant to allow newly graduated high school seniors to leave for a four-year university and they may opt for a nearby community college instead.

“It’s creating tension and anxiety at all of the universities,” Swenson said. “They don’t know what their enrollment ultimately will be in the middle of August.”

Beyond universities, college towns themselves will struggle if fewer students enroll in the fall, Swenson said.

On average, a college student living in a dormitory will spend $3,000 over nine months on non-school related expenses, such as going out to eat or buying items from a store, Swenson said.

“They spend a lot,” Swenson said. “Our economy at university towns are significantly geared towards providing goods and services to students.”

For the students, a delay in attending school and receiving a degree will result in reduced lifetime earnings, Swenson said. Lifetime earnings for low-income and non-white students who already face inequities will be reduced even more.

Most concerning for Swenson, however, is the reduction of low-income students returning to college in the fall, he said.

FAFSA renewals in Iowa increased by 2%, indicating most students plan on continuing to pursue their degrees. But filings by Pell-grant eligible students declined by about 500 applications for the 2020-21 school year.

Prior to COVID-19, low-income students were already more likely to drop out of school. Now, they may feel unable to return and finish their degree due to financial constraints.

“There’s a fraction of those students that are literally giving up,” Swenson said.

When a recession hits, colleges typically experience a bump in enrollment as people seek a degree to better their job prospects.

However, COVID-19 caused a “flash recession,” meaning the economy went into an unexpected slump. Throw in other variables, such as health risks, and it’s unknown what the future will hold for Iowa colleges, Swenson said.

“Nobody knows what’s going to happen and they’re horrified like everybody else that things might blow up in their face,” Swenson said. “We’re all in the same place.”