Hiding the Bottom Line: Three Bills That Would Weaken Financial Aid Transparency

Just a year ago, Republicans in Congress passed the One Big Beautiful Bill Act (OBBBA), a sweeping budget reconciliation package, to align with several key priorities of the Trump Administration, including making its tax cuts permanent. To offset a portion of that lost revenue, and in hope of providing downward pressure on college costs, huge changes were made to federal student lending. As a result, between last academic year and today, entire parts of our higher education financing system have completely shifted. 

As of July 1, Graduate PLUS loans have been eliminated for new borrowers, unsubsidized loans for graduate and professional students and Parent PLUS loans have been capped, and loans have been prorated for less-than-full-time students. For some families who relied on these loans—particularly older undergraduate students who are more likely to be part-time, graduate students, and Parent PLUS borrowers—the likely result won’t be that prices immediately decrease. Instead, many of these students will be forced to turn toward private and alternative financing to fill the gap.

But these might not be the only policy changes that students and their families are facing. Since the reconciliation bill passed, Congress has taken up three bills that would accommodate colleges and lenders by gutting price transparency efforts—particularly by hiding the bottom line from students on their financial aid offers—and by removing important consumer protection guardrails from certain types of loans.

Students and Families Need Transparency

For almost two decades, Congress has attempted to address longstanding issues with financial aid offers—the communication that an accepted or continuing student receives from their college or university that details how much the academic year will cost and how financial aid will be applied. In 2008, when the Higher Education Act was last reauthorized, Congress tasked the Education Department with developing a model financial aid offer meant to provide a voluntary template for institutions to more clearly communicate to students. And starting in 2012, a bill known as Understanding the True Cost of College Act was introduced (and re-introduced in almost every Congress since) in an effort to standardize financial aid offers so that there is a comparative “car window sticker” or “nutrition label” for higher education. 

Such a standard would be a huge win for students and families. Research in 2018 from New America and uAspire showed that institutions poorly communicated price and aid to students. For example, over a third of financial aid offers from over 500 different colleges didn’t include cost, and there were 136 different terms used for the same type of loan—24 colleges didn’t even use the word “loan.” Over 10 percent of offers used Parent PLUS loans in ways that downplayed what students owed, sometimes making it seem like the student owed nothing when the family was taking out tens of thousands of dollars in intergenerational debt. The Government Accountability Office (GAO) affirmed these findings in 2022 with a nationally representative sample, finding 9 in 10 colleges didn’t include net price. And uAspire recently took another look at financial aid offers finding that, at the 200 colleges they looked at, there were 11 different cost calculations, making it impossible for students to make apples-to-apples comparisons.

A core recommendation from the GAO’s report was for Congress to pass legislation requiring colleges to standardize financial aid offers. That is exactly what Understanding the True Cost of College would do. This student-centered, longstanding, bipartisan, bicameral bill would require a common financial aid offer form that all institutions would provide to their students, so students would see the same format, terms, order, and required information. Institutions would only be able to include dollar amounts for federal loans made directly to students, and would not be able to “zero” out any remaining costs using Parent PLUS, private, state, or institutional loans making it seem like the student owes nothing. It would finally create the “nutrition label” for financial aid offers, and would ensure that all institutions were playing by the same rules when it comes to communicating price and aid. 

Three Ways This Congress May Weaken Price Transparency

It’s rare these days for there to be bipartisan agreement on an issue, and financial aid offers, for this reason, became a target of this Congress for reform. Instead of pursuing the existing bipartisan and student-centered option, legislators introduced new weaker bills, and while these other pieces of legislation appear to promote transparency and clearer aid options, they actually obscure price and hand giveaways to the private and state-based lender markets. So far three bills—lobbied for and supported by lenders and institutional associations—have been introduced that would weaken price transparency:

1. The College Financial Aid Clarity Act: This House bill does take some important steps to define certain elements that must appear on an aid offer and how some of that information must be ordered. However, it stops well short of requiring a uniform design, allowing institutions to structure the visual layout, choose the appearance and emphasis of different elements, and introduce their own terminology.

One of the clearest examples of why design matters is how loans are included. The Clarity Act allows institutions to list any type of loan for which the student is eligible, including private loans and alternative funding sources alongside federal loans. The structure would allow institutions to blur the bottom line through usage of many types of loans.

Unsurprisingly, Sallie Mae lobbied for this bill in the lead up to its introduction.

2. The Improving Financial Aid Offers for Students Act: This Senate bill contains much of the framework for building a model financial aid offer as laid out in Understanding the True Cost of College Act, but the use of the aid offer would be voluntary. If an institution does not use the model offer, it would be required to include certain elements in its offer and in a certain order. Like the Clarity Act, private loans could also be included, but only if certified by the institution. But oversight functions are notably absent. It would be nearly impossible for the Education Department to ensure that the institutions would be following all the rules, allowing institutions to continue the status quo. And the Secretary of Education would never be able to require the use of the model offer. It would also permit institutions to link out to information, allowing institutions to hide important information and reduce comparability among offers. This bill has been championed by institutional membership associations and tellingly, not endorsed by any of the consumer and student advocacy groups.

3. The State-Based Education Loan Awareness Act: This bill, which is slated to be marked up in the Senate HELP committee this Thursday, would exempt state-based education loan programs from preferred lending requirements—the federal rules that require a school recommending certain lenders to disclose how it picked them, report annually on why their terms benefit students, and follow a code of conduct barring kickbacks and other conflicts of interest. Preferred lender agreements were established in response to scandals where lenders were paying schools or employees kick-backs in return for inclusion on preferred lender lists. The bill would also permit these loans to be promoted in financial aid offers. If enacted, institutions could use these loans to “zero” out a financial aid offer, even though state-based loans are not necessarily better than loans offered by for-profit providers.

Functionally, compared to federal student loans, state-based loans carry higher interest rates (though the bill requires at least one loan with rates and fees at least as favorable as a federal PLUS loan at origination, but not a guaranteed over the life of the loan), less repayment flexibility, and no pathways to discharge tied to public service careers, disability status, or fraud by the borrower’s school. Collections for these loans can be just as aggressive as those of for-profit lenders, including the ability to dip into bank accounts and garnish wages, pursue debts even after the death of a borrower, and revoke professional licenses. This bill is supported by some state-based lending agencies and their membership association.

Keeping Students and Families in the Dark

The higher education industry thrives on price opacity. The harder it is for a family to compare one offer against another, or to see a loan for what it is, the easier it is to blur the bottom line and move a student to enroll and for private lenders to profit. That dynamic is exactly why this moment is so precarious: as federal aid contracts and more families are pushed toward private and alternative debt, three bills marketed as transparency measures would instead entrench the confusion—and leave the “nutrition label” for higher education further out of reach than before.