Harumph. I looked for clarity in financial aid award letters.

This Spring our family went through our first round with college acceptances and financial aid award letters. I anticipated more structure to the entire process than we experienced.

FAFSA.ed.gov: where it all begins.

I had this preconceived notion that at the beginning of April 2012 Mod Squad Pete would actually receive a number of financial aid award letters on or about the same time he received word of any college acceptances. I saw us lining them up on the kitchen table to look at them all at once. I imagined opening up a new spreadsheet to plug in the numbers for apples to apples comparisons. I guessed that one or two colleges would share more information than the others, to help identify holes of data that needed to be researched.

Our experience wasn’t anywhere near that clean.

We received our best letter first; it was dated March 28th.

At the top of the letter, College 1 spelled out:

  • Student Cost of Attendance [COA]
  • Expected Family Contribution [EFC] from FAFSA
  • Outside Aid (includes scholarships and grants from other organizations or states)
  • Financial Need (COA less EFC less Outside Aid)

In a separate chart, under the heading “Awards”, the college listed scholastic awards, grants and loans. The college made sure the total, including loans, added up to the COA.

Why is this important? Let’s say your student applied to a college and received these numbers in the top of the letter:

  1. COA = $48,750
  2. EFC = $35,000
  3. Outside Aid = $500
  4. Financial Need = $13,250

Then let’s say separately, under Awards, the college lists the following:

  1. Founders’ Merit Scholarship = $2,000
  2. Direct Unsubsidized Loan = $2,000
  3. Parent PLUS Loan = $2,000
  4. Total Awards = $6,000

Maybe it looks good at first glance. However, while the college has identified $13,250 in need (after the family has come up with $35,000), they’ve provided $2,000 in scholarship money, proposed $4,000 in unsubsidized loans, and ignored the further need for $7,250.

The letters from College 2 and College 3 were similar to each other. Both listed the COA in tiny type, made no mention of the EFC, spelled out the offer (including grants, scholarships, and loans) and provided a total for the offer, making no reference to the EFC or comparing it to the COA.

College 4 still needed further information from us in late April when MS Pete took it off his list.

We received his last financial aid award letter (from College 3) on April 26, four days prior to National College Decision Day.

Fortunately, we had discussed the options enough by late April that we knew Pete could make his choice of college based upon his own preferences, rather than the net cost. But what about the student and family who are making the choice based upon the bottom line? What about the family that truly wishes and/or needs to make direct comparison between offers?

Here’s another description of the problem, from Inside Higher Ed, How Standardized Should Financial Award Letters Be:

“The aid is fairly standard, but it is not always displayed in the same way from letter to letter, which I think can be very confusing for all kinds of intelligent people,” said Catherine Ganung, a college counselor at the Taft School, a private high school in Connecticut, who previously worked as a financial aid director at Bates College and Hawaii Pacific University. Her students’ families are often financially savvy — many parents even work in banking — yet are flummoxed by financial aid award letters, she said.

In one case, she said, a student had letters from two private nonprofit colleges offering substantially different financial aid packages — and ended up thinking the one requiring more loans was a better choice than the alternative with lower out-of-pocket costs. “He was so swayed by the persuasiveness,” Ganung said. “It really seemed like, ‘Good news! We were able to meet your needs.’ ”

In other cases, colleges will include PLUS loans, which parents must qualify for, as guaranteed aid, or assume that students will earn their maximum allowed benefit from a work-study job, she said.

A number of people and organizations are paying attention to requiring standardized letters, and a few are opposing it — more on that to come. Our next go-round with financial award letters will be April 2014. Here’s hoping they offer more clarity by then.

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4 Comments

Filed under Paying for College

4 responses to “Harumph. I looked for clarity in financial aid award letters.

  1. It’s the middle that gets squeezed. The rich can pay and the poor generally receive the necessary aid. The middle are forced out of higher education. Fortunately, community colleges are a viable option. What really needs to happen is for all the stigma of going to a community college to disappear. That and learning a trade should hold the same appeal as a degree.

  2. Thanks, Carolyn and Ruth, for the comments. I think the community college option is on the rise — especially here in Virginia with the automatic transfer to the state 4-year colleges (given a few requirements).

    Regarding trades, you might be interested in what Grace at Cost of College wrote about vocational high schools here: http://costofcollege.wordpress.com/2012/06/12/should-we-go-back-to-more-vocational-high-school-options/

  3. Pingback: Direct Subsidized Loan vs Unsubsidized Loan | Direct Subsidized Loan

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