Higher education helps individuals earn high-paying and fulfilling jobs. Financial aid exists to help ensure equitable access to education despite the financial barriers students face. However, a recent executive order has impacted federal aid for students, negatively affecting enrollment rates, dropout rates, and institutional goals.
This guide explores the specifics of the new executive order, how it affects students and colleges, and strategies institutions can use to combat federal student aid changes.
What is federal student aid?
Federal Student Aid (FSA) is an office of the US Department of Education (DoE) that offers financial aid for students who want to go to college and lack the money to pay for it. These aids can either be grants, loans, or work-study funds. FSA grants and loans help pay for tuition, books, supplies, food, and housing. The types of grants offered include the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), and Teacher Education Assistance for College and Higher Education (TEACH) Grant.
Federal Student Aid also offers federal student loans such as direct subsidized loans, direct unsubsidized loans, and direct Parent Loan for Undergraduate Students (PLUS) loans. The work-study fund includes a federal work program that requires graduate and undergraduate students to earn money to help pay for school.
Students can apply for federal aid by filling in a Free Application for Federal Student Aid (FAFSA) form on the fafsa.gov website. The student’s higher education institution will use the FAFSA information from the website to create a financial aid offer.
Recent executive orders affecting federal student aid
In early 2025, the White House sent out a memo to pause all federal grants. This has created concern for college students who leverage or plan to use federal financial aid. Students are concerned that the federal funding freeze will hinder opportunities to use resources like FAFSA to attend college. Let’s explore more about what the new directive looks like.
Understanding the new executive order
The new executive order requires agencies to submit detailed information about projects, programs, and activities that may be tied to “financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.”
While the order was put on hold before it could take effect, Education Department officials said that student loans, Pell Grants, and federal work-study programs were not subject to this pause. Students are now concerned that they may not receive assistance from the Department of Education’s federal student loans and grants.
College leaders are also concerned that they will lose a large amount of federal funds. For instance, the order eliminates funding to institutions that offer diversity, equity, and inclusion (DEI) programs and initiatives. It also threatens student and academic research grants for science, technology, engineering, and math (STEM) fields.
Potential impacts on federal student aid and college enrollment
The new order has created three core potential challenges for institutions, students, and parents:
- Reduced college enrollment rates: Students are unhappy with the FAFSA freeze, with some students fearing that it could create inequitable education in the future. Lack of financial aid could create uncertainty among students who need financial assistance, causing them to drop out or avoid attending college altogether. One financial expert explained that even short-term uncertainties could lead families to make challenging college planning decisions about student aid.
- Accessibility issues: The new directive is likely to reduce federal aid for colleges. They may lose access to grants that benefit minority-serving institutions, graduation initiatives, college preparation programs, student retention, food banks, campus hospital systems, and child care for students who are parents. Many institutions show concern that the executive order will negatively impact crucial scientific research and disrupt the key goals and functions of certain higher education institutions.
- Pell Grant funding shortfall: The Pell Grant program may have a shortfall in the coming fiscal year, based on Congressional Budget Office projections. The Office estimated that the Pell Grant program could end 2026 down by $10 billion if funding levels stay the same as 2025. If this happens, the Institute for College Access and Success warned that students could experience “eligibility or funding cuts for the first time in more than a decade.”
Strategies to combat changes in federal student aid availability
While the new executive order poses challenges to colleges, potential opportunities for reform and innovation may help institutions maintain and improve enrollment rates. There are many ways for higher education institutions to respond to changes in federal student aid.
1. Financial planning and budgeting
Colleges can alleviate financial barriers by collaborating and partnering with local communities and businesses. Doing so may open new student pathways with apprenticeship opportunities and work-study programs without too many additional budget resources.
The institution can also manage financial gaps by encouraging alumni to assist the institution and its students through mentorship opportunities, acting as institutional ambassadors, and offering donations.
2. Scholarship and grant opportunities
Take time to reevaluate the institution’s awards and processes and identify opportunities to improve efficiency and timing. Doing so could help you find ways to maximize institutional financial aid resources.
Some current and prospective students may be unaware of scholarship and grant opportunities that cater to a wider range of students. You can help these students by posting more accurate information about the options students have. Try using social media platforms, email campaigns, and the college website to raise awareness.
3. Enrollment management
Given that financial barriers are one of the top reasons students drop out of college, institutions need to ensure they address this barrier, especially with the recent challenges of FAFSA filing. Emphasize the value of education over its costs by highlighting graduate success stories and program benefits and outcomes.
Some colleges are trying more out-of-the-box approaches to improve enrollment rates. For instance, Ferrum College president Mirta Martin visited 35 homes to recruit new students after the new executive order caused around 100 students to drop out. Ferrum staff mainly visited students who previously expressed interest in Ferrum but never committed. They offered more appealing perks, such as simpler application forms and tuition discounts for continuing and incoming students.
4. Tracking at-risk students
The stress of the new executive order on students may impact academic performance and attendance rates. One study showed that one of the top stressors was balancing academics with family, personal, or financial responsibilities. Incorporating software that identifies and tracks at-risk students can make a difference.
This type of software monitors attendance rates, academic performance, and graduation rates of students to identify students with lower rates who may need assistance. This allows faculty members and college administrators to understand what type of assistance a student needs. They may then develop solutions specific to their situation to get them back on track.
5. Well-timed interventions
Create well-timed interventions for students who do not meet aid application and scholarship requirements. To remain enrolled, some students need to first ensure they have reliable housing and food. Colleges can assist these students by setting aside an emergency fund as a safety net.
You can raise this emergency fund through donations and building the amount into the annual budget. Another option is to adjust on-campus dining and housing costs to match the amounts grant money and institutional scholarships can offer.
6. Ease application points
Since the updated 2024-2025 FAFSA rollover, the demographics of incoming first-year classes have changed, in part due to processing delays and technical glitches that students experienced while applying for financial aid.
Colleges can make the process more efficient for students by temporarily simplifying or removing additional information required on forms. Include FAFSA resources on the college’s admissions website and make sure to notify applicants about aid offers earlier. Doing so gives students more time to make informed decisions about their enrollment and financial aid options.
Keep track of strategy success with Watermark
With the recent impacts of the new executive order on students, colleges should consider evaluating how they can address student needs. Watermark Student Success & Engagement is a solution that helps higher education institutions support unique student needs and enhance retention rates with detailed data-driven reports.
Our solution helps colleges track student-performance insights in real time, identify at-risk students, predict future outcomes, and boost student retention and enrollment rates with proactive support. To get started, learn more about Student Success & Engagement and request a demo with us today.
