Will the Office of Federal Student Aid Find Opportunity Amidst the Loan Crisis?

Bottom Line

In late June, Arthur Wayne Johnson was appointed as head of the Office of Federal Student Aid at the US DOE. Challenges abound for Johnson with 750,000 college-bound high school seniors failing to submit the FAFSA despite being eligible for aid and nearly 3 million students abandoning their postsecondary education due to financial constraints each year. The complexity of the financial aid process is partly to blame, and innovative technology solutions can help.

Recently, Tyton Partners conducted a study of the evolution of the financial aid technology landscape, which included a national survey of over 1,800 higher ed administrators and over 30 interviews with administrators, technology suppliers, and other financial aid experts. The study “Finding a Fit: the Evolution of Student-Centered Financial Aid” illuminated some of the issues with the current financial aid system, while projecting how it will develop in coming years. One key advancement will be the shift to a more student-centered financial aid process. Institutions and companies are just beginning to innovate around this opportunity—can federal officials help catalyze it?

Opportunities Amidst the Crisis

The trend towards student-centered financial aid is at least partially driven by greater competition for students, causing a growing number of higher ed institutions to treat their students as customers. With students receiving more personalized services in their day-to-day lives, they expect the same level of customization and ease-of-use throughout their interactions with institutions. In the coming years, technology solutions highlighting superior user experience and personalization of student interactions will gain traction, and administrators will in turn be able to serve students more efficiently and effectively.

In addition to a more student-centered process, Tyton Partners’ research reveals two additional trends emerging within financial aid technology:

• Student Information Systems will remain the primary solutions for core financial aid processing but will allow for greater integration with other systems. Today, over 75% of schools use their SIS for FAFSA processing and award packaging, and the SIS will continue to be the core financial aid processor for most schools going forward. With more technology providers shifting to service-based architecture and stakeholders realizing the value of student data, however, integration services are becoming more common.
• Opportunity for point solutions targeting discrete problems in the financial aid system will increase. The combination of institutions looking for better ways to serve their students and SIS enabling greater integration with other systems creates an opportunity for start-ups to identify and attempt to alleviate problems within the existing financial aid system. More providers should enter the market, and institutions will have additional options when choosing the technology to power their financial aid process.

Want to learn more?

To better understand how these trends in financial aid will affect your institution or company, access Tyton Partners’ Finding a Fit: The Evolution of Student-Centered Financial Aid, a publication on challenges and emerging solutions related to technology in the U.S. financial aid system.  Click here to connect with our team on how this analysis may support your growth and impact goals.