2600 or so 4-year colleges in the US; 10 agreed to greater clarity in financial aid letters.

Last week a few colleges met with the White House to discuss financial aid award letters.

English: Al Franken, Senator from Minnesota

Minnesota Senator Al Franken. Image via Wikipedia

Representatives from ten colleges, out of the 2618 traditional four-year colleges in the US, agreed to work on their letters to provide clearer information to prospective students.

That’s a depressingly small number of colleges taking this step, but it’s a start.

Many individuals and agencies have been asking for greater clarity and transparency in financial aid award letters for some time. To name a few…

Kim Clark and Paul Jaegersen developed a website focusing on this issue three years ago, providing real examples and an excellent financial aid glossary. I wrote about it here: Grading Financial Aid Award Letters.

Last fall the Consumer Financial Protection Bureau distributed their proposal for a better format for financial aid information dubbed, Know Before You Owe. See: Homework from the Consumer Financial Protection Bureau.

President Obama announced and supported the Know Before You Owe financial aid shopping sheet. Until his biography became a bestseller both Mr. and Mrs. Obama had significant student loan debt. From the EdWeek article by Caralee Adams, Obama Hopes Initiative Will Better Inform Student Borrowers:

“I promise you, I wish Michelle and I had had that when we were in your shoes,” said Obama, who spoke about their $120,000 in student debt that they paid off over 10 years.

The President further supported this effort in January. From Obama Outlines Details of College Affordability Proposals, written by Caralee Adams:

The administration also would like make the financial aid shopping sheet, announced in October, a requirement for all schools to make it easier for families to compare college financial aid packages.

A couple of weeks ago Minnesota Senator Al Franken and eight co-sponsors introduced legislation, “Understanding The True Cost of College Act,”  to require more clarity in financial aid award letters, requiring colleges to use a standard format to provide easier comparison of offers as well as differentiating between grants and scholarships (“free” money) and loans (repayable). See Senator Introduces Bill for Standard College-Aid Letters.

I think this is all a good thing. I’m, um — you can fill in optimistic, foolish, or naive —  enough to think this is something many people could agree upon. Clarity, transparency, consumer awareness, right? Sure there may be valid concerns about increased regulations. But balance that against ensuring prospective college students understand the details of the financial agreement they are accepting?

Of course, there are other opponents. Namely, the college financial aid officers themselves.

The National Association of Student Financial Aid Administrators, NASFAA, responded to possible legislation with the following, Financial Aid Administrators Advocate Lawmakers to Resist Standardization of Award Letters:

FAAs told lawmakers that improvements to award notifications are of course desirable and a certain level of defined terminology would be welcome, but the regulation of award letters could interfere with an institution’s ability to meet the specific needs of its unique student body.

Instead, NASFAA released their suggestions for improving financial aid award letters, listing ten elements that should appear in a financial aid package. See Consistent and Clear Financial-Aid Award Letters Urged, by Caralee Adams in EdWeek.

While NASFAA recommends standardization of certain award-letter terminology and elements, it acknowledges that there needs to be some flexibility for institutions to customize communication for their own student populations.

The full report, a 15 page pdf, can be found on this page: Improving Award Letters and Consumer Information, on NASFAA’s website. A short video also presents their case; a couple of clips:

Some lawmakers contend that award letters can be difficult to understand and compare.

Our members have the best working knowledge of the student financial aid programs. Their recommendations will help maximize the effectiveness of award letters and also avoid unintended negative consequences of standardization.

I have no arguments with the recommendations made in the report. NASFAA calls for standardization of content, terminology, and definitions. I still want to see a standardized letter required. Our experience with the required net calculator indicates colleges will implement generalized requirements to very different degrees.

What’s your preference? Less regulation, let each college decide… or a standard format from all colleges so students can truly compare?

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1 Comment

Filed under Paying for College

One response to “2600 or so 4-year colleges in the US; 10 agreed to greater clarity in financial aid letters.

  1. Excellent post. Okay, so representatives of institutions of higher education don’t think they can come up with a standard format because it wouldn’t account for differences in living at home or have a 21 meal contract versus a fourteen meal contract? That is the only specific excuse they could come up with. Makes you wonder about their ability to actually teach the students. I’ve been looking and given the number of students who are taking out non-federal students loans, there is a lot of incentive on the part of some schools to be less than transparent.

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