Data-Informed College Decisions: Students Deserve Clear, Consistent, and Complete Financial Aid Offers

by: Tim Kinoshita

Earlier this month, millions of students nationwide made the life-changing decision to attend college. For these students and their families, enrolling in school is the culmination of years of hard work and determination, and these students have much to celebrate. Unfortunately, recent research suggests that many students are not provided clear, concise, and accurate information they need to fully understand the financial implications of the choices they have made. For example, financial aid offers, provided to students once admitted to a school, help students determine attendance costs, gift aid, work-study, and/or student loans available to cover those costs. A high degree of variation, however, exists in financial aid offer letters sent from different colleges, and many do not clearly convey critical information to their prospective students.

A 2017 report from The Institute for College Access and Success (TICAS) developed three criteria for evaluating financial aid offer letters: (1) provide the full cost of attendance; (2) separately list aid that needs to be earned or repaid from aid that doesn’t; and (3) calculate—and show—the net price the student will need to pay after grant aid is applied. In the same report, TICAS found that only 10 of 150 letters[1] met all three criteria. The following year, New America and uAspire published a similar study[2] about award letters from 515 institutions and found a lack of clear and consistent communication, including confusing terminology and awards that are not clearly defined or differentiated.  The authors identified several areas of concern, including misleading presentation of Parent PLUS loans and work-study grants, failing to list costs on the letter, failing to calculate the net price, and a lack of clear next steps for students and families.

Leaders in Congress have taken note. In March 2019, Senators Grassley, Smith, and Ernst reintroduced the “Understanding the True Cost of College Act,”[3] which requires a standardized financial aid offer letter for all students who apply for financial aid. The legislation requires clear communication of financial aid information, including the use of consistently defined terminology for all postsecondary institutions, and the separation of different aid types into categories with subtotals.  On April 23, 40 organizations signed onto a letter supporting the “Understanding the True Cost of College Act,”[4] praising it as a necessary step in ensuring students have the information they need to determine the school that’s best for them.

While the legislation from Grassley, Smith, and Ernst is necessary to ensure uniformity in financial aid offers across higher education institutions, there is nothing to prevent individual institutions from improving the financial aid offers given to their prospective students in the meantime. Moreover, schools have resources at their disposal to do so. For one thing, the U.S. Department of Education has released the College Financing Plan[5] template, the new name for the Obama administration’s Financial Aid Shopping Sheet, as a standardized template for institutions to provide cost information to students.

The report by New America and uAspire includes a set of actionable recommendations for schools that may need a more tailored approach; these recommendations reflect recently released guidance from the U.S. Department of Education’s Federal Student Aid office. The National Association of Student Financial Aid Administrators (NASFAA)[6] has also released a series of resources that include a glossary of terms and results from consumer testing of different aid letter formats. Schools should use these resources to improve their communications about college cost with students, and legislators should standardize financial aid offers across schools to ensure aid offers are directly comparable across institutions.

This effort by policymakers to improve information quality that supports college decision-making closely aligns with the goals of PostsecData. The PostsecData community has long focused on improving data quality, comprehensiveness, timeliness, and availability. Ensuring that this information reaches students in ways that help them make the best possible decisions is just as critical.