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Standardizing Financial Aid Award Letters as College Cost Disclosures
Mark KantrowitzPublisher of Fastweb and FinAid
October 10, 2012
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Nutrition and Energy Labeling
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Monroney Window Sticker (Cars)
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Schumer Box (Credit Card Solicitation)
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Credit Card Act of 2009 (Statements)
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Combined Mortgage Disclosure
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Private Education Loans (TILA Reg. Z)
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The Four C’s
To make informed decisions concerning the tradeoffs between college affordability and college quality, families need information about college costs and financial aid that is Clear Correct Complete Comparable
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Award Letter Survey of Students/Parents
84% of students and parents said award letters should be standardized to make them easier to understand and to compare
29% of financial aid award letters did not mention the college’s cost of attendance
61% of financial aid award letters did not include basic info about loan terms, such as interest rates, monthly payments and total payments
64% of award letters did not mention the net price, the difference between the cost of attendance and just grants and scholarships
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Most Problematic Practices
Blur the distinction between grants and loans • Failing to label loans as loans• Commingling loans with grants • Presenting a net cost (COA – Aid) instead of a net price (COA – Gift Aid)
• Failing to disclose basic loan info near loan amounts, such as interest rates, monthly payments and total payments (assuming a 10-year repayment term)
Make it difficult for families to compare real college costs for different colleges on an apples-to-apples basis
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Confusion of Net Price and Net Cost
Families often confuse net cost with net price• 2012 College Decision Impact Survey included a
survey about net price calculators• After students chose a college, they were asked
whether the net price estimate was close to the EFC • Net cost is almost always close to the EFC• Net price is never close to the EFC except at “no
loans” colleges
More than a third (35%) said yes, 20% said no, 46% said they weren’t sure or don’t remember
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Example Problematic Award Letter
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Improved Financial Aid Award Letter
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Proposal Comparison - Agreement
Requirement CFPB Sen. Franken NASFAA
Standardize Content Yes Yes Yes
Standardize Names/Terminology & Definitions Yes Yes Yes
COA = T&F R&B B&S Transportation Personal Yes Yes Yes
Distinguish Gift Aid from Self-Help Yes Yes Yes
List Assumptions (Enrollment Status, Housing) Yes Yes Yes
List Cumulative Debt Yes Yes Yes
List Estimate of Total Debt at Graduation Yes Yes Yes
List Contact Information & Deadlines Yes Yes Yes
List Cohort Default Rate Yes Yes Link
List Graduation Rate Yes Yes Link
Restrict Delivery Mechanism No No No
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Proposal Comparison - Disagreement
Requirement CFPB Sen. Franken NASFAA
Full COA on First Page of Award Letter Yes Yes No
Total Gift Aid on First Page of Award Letter Yes Yes No
Net Price (COA – Gift Aid) on First Page Yes Yes No
List Grants and Loans Separately Yes Yes No
Subtotals after Each Type of Aid Yes Yes No
Must Label Loans with the Word “LOAN” Yes Yes No
List Interest Rate, Monthly Payments (10 Year Term), and Total Payments Near Loan Amounts
Yes Yes No
Standard Format, Order, Placement & Design Yes Yes No
Consumer Testing (Student/Parent Feedback) Yes Yes No
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Proposal Comparison – Not Specified
Requirement CFPB Sen. Franken NASFAA
Disclose Front-Loading of Grants -- Yes --
Disclose Outside Scholarship Policies -- Yes --
Downloadable Machine Readable Data Format Yes -- --
Comparison of Net Price with Benchmarks Yes -- --
Comparison of Default Rate with Benchmarks Yes -- --
Disclose Institution Type (Level & Control) Yes -- --
Mandatory Standard -- Yes Optional
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Financial Aid Shopping Sheet
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Thank You!
Mark Kantrowitz’s student aid policy analysis papers may be found at www.finaid.org/studentaidpolicy
Follow him on Twitter at @mkant