The House's Financial Aid "Confusion" Act

On Thursday the House will mark up a recently introduced bill that purports to improve price transparency on financial aid offers, the documents colleges send to admitted students outlining their cost and aid options. At a moment when students and families urgently need clearer information to make informed decisions, you would hope that Congress might take up the bipartisan, bicameral Understanding the True Cost of College Act — the product of years of policymaker, researcher, consumer advocate, and practitioner consensus around what real transparency requires.

Instead of allowing students and families to make apples-to-apples comparisons among their college choices, the House Republicans’ College Financial Aid Clarity Act moves in a direction that preserves institutional discretion and all but guarantees that financial aid offers will remain inconsistent, confusing, and difficult to compare.

The challenges with financial aid offers and how they communicate price and aid to students are well established. In 2018, New America and uAspire looked at hundreds of financial aid offers and found that nearly one-third did not contain any cost information. We also found that colleges and universities used more than 130 different terms for the same student loan — and that 24 of those colleges didn’t even call it a loan. Most offers mixed together grants, scholarships, and work-study into one sum, even though these sources of aid have very different terms and conditions. Among the worst offenders, some made it seem like a student got a “full ride” when their financial aid package maxed out a variety of student and parent loans.

The Government Accountability Office replicated our study in 2022 and affirmed what we found, and also saw that some things had gotten worse. Approximately 9 in 10 colleges did not include net price, the amount the student has to pay after scholarships or grants, or they understated it. uAspire just published another look at a sampling of offers and found that while some things like aid separation have improved, the ways in which colleges are calculating net price remains inconsistent and non-comparable among offers.

Understanding the True Cost of College addresses all of these issues directly by requiring a common and comparable financial aid offer form—like a car window sticker, or mortgage disclosure—to students and families. Importantly, it would be developed with the input of institutions and students, and consumer-tested with those same groups. A true standard form is the only way to ensure that every student receives the same information, presented the same way, using the same terms. It is the only way to break the poor incentive structure institutions face when it comes to price transparency and to end surprise billing in higher education.

The College Financial Aid Clarity Act does take steps to define certain elements that must appear in an aid offer and how some of that information must be ordered, and engages in some consumer testing. That is all a step in the right direction. But it stops well short of requiring a uniform design. Institutions could choose how to structure the visual layout, choose the appearance and emphasis of different elements, and even introduce their own terminology.

This may all sound like insider baseball and just a mere technical distinction, but it’s the difference between true comparability and continued confusion. And, unacceptably, it would allow institutions to continue to downplay and obfuscate their prices.

One of the clearest examples of why design matters is how loans are included. Understanding the True Cost of College Act takes a careful, consumer-protection oriented approach by allowing only for the inclusion of federal student loans and requiring that any other loans, including Parent PLUS, state, private and institutional loans, be kept separate, alongside more information on how to access those sources of aid if needed and a reminder that they need to be repaid. This reflects a hard-learned reality for many students: when institutions blur the line between aid and debt, students are more likely to misunderstand their true cost, borrow without knowing they are borrowing, or overborrow which potentially undermines the loan limit efforts that Republicans put in place in H.R. 1 to prevent that from happening.

The College Financial Aid Clarity Act moves in the opposite direction. It allows institutions to list any type of loan for which the student is eligible in one bucket, including not just federal loans, but also state, private, and institutional loans, and likely also private loan-like products such as Income-Share Agreements. This structure invites exactly the kind of confusion student and consumer advocates have been trying to eliminate; for instance, while federal loans are generally available to all students regardless of their credit scores or other factors, private loans are not. Yet, they could all appear on these offers as available sources of credit to cover students’ costs. Allowing nonfederal loans on aid offers, which almost always carry higher interest rates, less flexible repayment, and more aggressive marketing, poses a significant danger.

The College Financial Aid Clarity Act also requires adding many new cost calculations to financial aid offers. These figures would be based on new net price calculations comparing the total cost of the program (including living expenses) to the total required costs of the program (which includes just tuition and fees and living expenses for those living on campus). While information like this may be technically relevant or useful, having what looks to be five different cost calculations presented on each offer a student receives will increase confusion and likely decrease comparability.

This approach also creates a serious enforcement and accountability problem. When every institution uses its own form, even if in good faith, oversight would be exceptionally difficult, if not impossible. The Department of Education, particularly a stripped down and dismembered one, won’t be able to review thousands of institutions producing thousands of variations of “compliant” aid offers, each structured differently from the last. The bill calls for the Secretary only to review a random representative sample of offers every other year to understand compliance, which is not a recipe for strong consumer protection. A standardized, federally designed form, like the one in the Understanding the True Cost of College Act, dramatically simplifies compliance and oversight.

Understanding the True Cost of College achieves what students actually need: a stakeholder driven, consumer tested, truly comparable financial aid offer. It eliminates the guesswork created by institutional variation and prevents misleading design choices. And, it makes oversight feasible because the form itself comes from the Education Department and is already standardized. That level of clarity is essential when these offers communicate billions of dollars in taxpayer-funded grants and loans each year. These are public investments that should be accompanied by public accountability.

It’s not hard to understand why some colleges might resist this level of clarity. Financial aid offers are not just informational documents, they are recruitment tools. Flexibility allows colleges to highlight what they want and downplay what they don’t. But students and families cannot continue navigating a marketplace where colleges can obscure affordability. Congress should adopt the model that protects students and honors the public investment behind these programs, not one that preserves the advantages towards institutions.