Against a backdrop of rising college costs and student borrowing rates, more than 400 colleges and universities have committed to following standards of clarity in financial aid offer letters, which have become confusing and — in some cases — deceptive.
Most universities don’t tell students the net price of attending, including living expenses and excluding grants and scholarships that don’t need to be paid back, according to a federal report issued in 2022. The Government Accountability Office report found that colleges present costs and aid in different ways. While 50% of surveyed schools underestimated the cost of attendance, more than 40% didn’t provide an estimated net cost at all.
“We found a concern that if colleges were fully transparent about costs, that they would seem more expensive than a competing school,” says Melissa Emrey-Arras, director of education, workforce and income security for the GAO.
“What happens then,” she says, “is students can have significant surprises in store for them when they enroll in school. This can create real hardship.”
[Read: An Ultimate Guide to Understanding College Financial Aid.]
Higher education institutions in the College Cost Transparency Initiative, or CCTI, say they are committed to making financial aid information more complete and transparent, says Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators, which manages the initiative.
In order to join, a college’s boilerplate financial aid letter must meet the group’s principles and standards. These include ensuring that offer letters are consumer-friendly and provide the most accurate possible estimate of the recipient’s cost of attending college.
Financial aid is complex, Draeger says, because there are so many sources of funding, from institutional and private to state and federal. And college financial aid offices don’t always have complete information when they send out letters, he says.
“We got together and are trying to come up with a clear and concise way for students and families to understand the cost of attending college and how much aid they’ll get,” Draeger says. The initiative provides examples of well-prepared aid letters on its website.
External Push for Standardizing Aid Letters
For years higher education has been criticized for misleading communication about financial aid, and federal guidelines haven’t made much difference.
A decade ago, the Obama administration developed what has become known as the College Financing Plan, formerly the Financial Aid Shopping Sheet, which allows students to compare aid and award offers between different institutions. The problem is that not all colleges participate.
[READ: 15 Schools That Meet Full Financial Need With No Loans.]
Many organizations in the higher ed sector have been pressing colleges for years to make costs more transparent and award letters more understandable.
For example, a 2018 study by New America and uAspire researchers, which included an analysis of 515 financial aid award letters from colleges to high school seniors, reported numerous concerns. For example a federal loan to parents was described as an “award” in about 15% of letters, which might suggest that it did not need to be paid back. In addition, students’ out-of-pocket costs were calculated 23 different ways across the colleges that calculated them and 70% of letters that included work-study didn’t define the term or explain how it differed from other types of aid.
Standardizing financial aid letters so that they are complete and clear shouldn’t be voluntary, Emery-Arras says.
Some members of Congress agree. U.S. Rep. Lisa McClain of Michigan and Rep. Virginia Foxx of North Carolina, two Republicans, co-sponsored legislation this spring to require that higher education institutions that participate in federal student aid programs use standardized terms, formatting and components regarding costs.
[Read: How to Read Your Financial Aid Award Letter.]
The U.S. Department of Education disbursed almost $112 billion in financial aid to students through various grant and loan programs in 2022.
“We think it’s a good sign that schools are recognizing this is a problem,” Emery-Arras says. “It’s a good step to move toward transparency in financial aid letters. But (CCTI) is still a voluntary effort and voluntary efforts have not radically changed things in the past.”
Voluntary Commitment Is Quicker
Financial aid experts say that voluntary commitment and legislation can work together to improve communication with students and families. Draeger with NASFAA says that the College Cost Transparency Initiative is not an effort to forestall legislation, but that while regulation is slow, self-monitoring can happen quickly.
“A legislative mandate and industry efforts are not adversarial,” he says. “The initiative might help inform any regulatory process.”
At the State University of New York, whose 64 campuses are participating in the CCTI, creating a clear and student-centered financial aid letter is an evolving process, says Patricia Thompson, assistant vice chancellor for student financial aid services. More than 360,000 students attend SUNY, over half of whom attend tuition-free through a combination of state and federal aid.
Financial aid officers from across SUNY’s campuses gather regularly to review their offer letters, Thompson says, to make sure that the format is as clear as possible. Offer letters often include information that must be confirmed, including student FAFSA data, funds that have not cleared the legislative process or grants with eligibility requirements. Some elements may involve a separate offer letter, she says.
“This is a great effort,” Thompson says. “We all need to reinforce the idea that financial aid doesn’t have to be so big and scary. I want people to look at our forms and not be confused.”
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Colleges Work to Make Financial Aid Award Letters Clearer originally appeared on usnews.com
