Is photoshop Elements able to use RAW files? I tried dragging a photo in but it didn't work so I was wondering if I need to change a setting or something or if it just doesn't accept RAW files.
Older RAW files, yes. Anything in the last two/three years, you will need to use Adobe RAW Converter (lite) to convert them into DNG. Personally I don't use Adobe anymore for this reason. I don't want to save my RAW files, a DNG, and then a TIF or JPG.