Momentum Grows to Increase Transparency and Consistency of Award Letters

Financial aid award
letters are crucial tools for students and families to determine which colleges
are within reach, but many letters are difficult to decipher and compare. The Institute for College Access and Success’ (TICAS) December
2017 analysis of almost 200 award letters, and New America and uAspire’s June
2018 analysis of over 500 award letters from unique institutions found
numerous ways in which those letters are inconsistent, confusing, and in many
cases misleading to students – such as omitting costs, grouping grants and
loans together, using different terms for the same type of aid, and not
calculating a bottom-line net price to show how much the student and family
will have to cover.

We’re excited to see
growing momentum for improving award letters, and we applaud the National
Association of Student Financial Aid Administrators’ (NASFAA) recent support
for requirements that would set standard terminology and formatting practices
for award letters. Specifically, at their recent national conference, the
NASFAA Board decided to:

• “Support a
  policy that would require schools to disclose estimated cost, as well as
  an estimated net price in their award notifications.
• Support
  requirements that the federal government, in partnership with financial
  aid professionals, develop a set of common, consumer-tested terminologies
  and definitions for student aid programs.
• Support
  requirements that grants and loans and other self-help aid not be listed
  together in award letters, and that loans always be clearly labeled as
  such.”

Here’s why this matters:
(See actual award letter examples of these practices in our reports)

• Providing the full cost of attendance: 
  Financial
  aid is only part of the equation when determining which colleges are
  within financial reach – students also have to know how much the colleges
  will cost. For example, when buying a car, it’s not enough to know that
  you have a $2,500 rebate – you also have to know whether the car costs
  $10,000 or $25,000. However, a large share of award letters include no
  cost information at all, and some of those that do include some cost
  information include only tuition and fees and other costs paid directly
  to the college. Yet students’ understanding of total costs is critical to
  being able to assess their ability to pay for them. Basic living expenses
  such as housing and food are part of the cost of attending college, and
  students also need to pay for transportation as well as textbooks and
  supplies to be able to attend class and study.

• Separating grants from loans and
  work-study:
  There are
  important and big distinctions between types of aid – grants and
  scholarships don’t have to be paid back, loans need to be repaid with
  interest, and work-study funds need to be earned over time after securing
  a qualifying job. Unfortunately, both of our analyses found that less
  than a quarter of award letters separate grants, loans, and work-study. Many
  award letters presented all the aid types lumped together – leaving
  students left to sort out what strings are attached to each aid offer.
  Clearly separating aid by type with simple explanations can improve
  student decision-making. 

• Calculating net price:
  Net price
  is the difference between the full cost of attendance and
  grant/scholarship aid. It’s the remaining amount that a student needs to
  cover through savings, earnings, or loans to attend the school. Comparing
  net prices is crucial to getting an apples-to-apples comparison of how
  much money students and their families will have to pay to get to and
  through college.

  Our
  analyses found that many award letters don’t calculate any bottom line
  cost, and those that did used inconsistent calculations. New America and
  uAspire research found over 23 different calculations for this
  bottom-line cost, which makes comparisons among letters almost impossible,
  and TICAS’ analysis found that only 13 percent of award letters included the net
  price.

  It’s also
  important for students and families to know what their “estimated bill”
  is going to be, namely, what they will need to pay directly to the school
  before they can enroll and start classes. uAspire has seen time and again
  students choose their school based on their financial aid packages in the
  Spring, only to receive a bill in the Summer that is much higher than
  what they anticipated. 

• Using standard terms and definitions
  Award
  letters are filled with jargon and inconsistent terms for the same type
  of aid. For example, New America and uAspire found that the 455 colleges
  that included unsubsidized student loans in their aid packages listed
  them in 136 unique ways, and 24 of those ways didn’t even include the
  word “loan.” Student-centered communication of mandated common terms and
  definitions will significantly increase transparency.

  It is
  important to consumer test these terms and definitions with stakeholders,
  including students (particularly low-income and first-generation students
  who may be less familiar with the college process), parents, college
  advisors, consumer advocates, financial aid administrators, and others. 

With clearer and more
comparable award letters, students and families will be able to make more
informed decisions about where to go to college and how to pay for it. NASFAA’s
recent Board decision aligns with our belief that poor communication that obscures
costs and available financial aid serves neither students nor schools. Unclear
costs and uncertainty about how to cover them put students at risk of dropping
out if their bill is larger than anticipated— and dropping out is one of the
major predictors of federal student loan default. Both students and colleges
are better off when more students are able to complete and repay their loans
successfully. While, in and of themselves, award letters will not solve the
gaps in financial aid that create affordability challenges for students,
improvements to those communications will help ensure that students and
families clearly and accurately understand the costs they’ll be facing. 

We applaud NASFAA,
federal and state policymakers, as well as college financial aid administrators
who see themselves as part of the solution. uAspire has already heard from
colleges that are leading the way to improve their own award letters, including
Colorado State University, the University of Missouri, and Dartmouth College.
If you are working to improve student-centered communication of financial aid
offers, we would love to hear from you.

To learn more about the
shortcomings of financial aid award letters and policy solutions to improve
transparency of college costs and aid, check out our research:

• Decoding the Cost of College: The Case
  for Transparent Financial Aid Award Letters (New America and
  uAspire)
• Cost in Translation: How Financial Aid
  Award Letters Fall Short (TICAS)