More Than Tuition: Opening the Door to Greater Transparency and Helpful Oversight to Ensure Students Can Afford College

Today’s college students face much more than a tuition bill when paying for college. Whether one semester or more than four years, tuition and fees are only one part—and for many college students, a very small part—of college costs. In addition to books, course fees, loan fees, and other costs of being in school, students must still cover everyday expenses such as food, housing, transportation, healthcare, and, for the 22 percent of college students who are also parents, even child care. These costs add up: Among students attending public two-year colleges, living expenses on average constitute about 80 percent of a student’s total budget.

Facing this daunting collection of expenses, all while trying to focus on their studies, students need—and are permitted to use—their financial aid dollars to help cover not only tuition and fees, but also all associated living expenses during the academic year. This entire academic-year budget, known as “cost of attendance” (COA), is defined by federal law. For most students, COA includes tuition and fees, the cost of housing and meals, an institution-determined allowance for books and supplies, transportation, and miscellaneous education-related expenses. Depending on the student’s situation, COA may also include allowances for dependent care, costs of study abroad programs, or expenses incurred due to a student’s disability. COA can also include fees for federal and nonfederal loans.

Congress first defined COA in 1972 and has updated it with only incremental changes since, despite a rapidly diversifying and less affluent student body. This changed when, at the end of December 2020, Congress passed an omnibus bill with significant implications for higher education. The legislation included substantive changes to the definition of COA, and also repealed a 1986 prohibition on the Department of Education (ED) regulating COA.

For the most part, these changes are geared towards providing institutions with greater clarity into—and scrutiny of—how they can determine a student’s living expenses. For instance, estimates of expenses for food now must allow for three meals a day, a change that should help ensure students have sufficient resources to avoid becoming food-insecure. Likewise, schools are now required to develop non-zero estimates of housing costs for students living with parents, a change that reflects the reality that many college students living with family still pay rent. Ideally, schools will use an evidence-based approach to generate estimates of these expenses, since doing so will help students plan for college and ensure they can access sufficient financial aid to pay for basic necessities.

If institutions fall short in developing accurate and reliable COA estimates, ED will finally be able to take action. That’s because until now, the Secretary has been unable to place requirements on how institutions calculate their COA components. This prohibition on regulation was added by a Democratic Congress to prevent the Reagan Administration from using COA regulations to reduce federal spending on financial aid. Allowing ED to regulate means we are entering a new era when it comes to COA.

Going forward, ED will have greater authority to deter a college or university’s ability to engage in COA funny-business (such as setting off-campus living budgets too low in order to limit students’ ability to take on student loans and risk the institution’s cohort default rate) and to hold institutions accountable for the COAs they set. Below, we discuss why ED should be cautious in its approach to regulation and what thoughtful regulation of COA might look like.

Thoughtful Regulation on COA Can Improve Students’ Experiences While Preserving Flexibility

Overall, the new legislation should ensure that colleges provide students an accurate picture of their college expenses. Translating this change from legislative text into practice by promulgating good regulation will be a big challenge, particularly given that regulatory negotiations are often weighted more heavily toward the interests of colleges than the interests of students.

By giving ED the ability to regulate COA, lawmakers have allowed the Secretary to improve the accuracy of institutional assessments of student living expenses. However, preserving some flexibility for institutions in measuring COA remains desirable. For one thing, living costs vary substantially by geography, and a student’s needs and preferences will also shape how much they are willing and able to pay for things like housing and meals. To the extent that institutions can develop COA estimates that accurately reflect those needs and preferences, regulations should allow them to do so by using available evidence on student needs. But regulations should not standardize costs across the board; COA should be evidence-based and account for the true costs college students are facing, including regional or other adjustments for unique circumstances.

Regulations should also limit the ability of schools to underestimate student living costs in an effort to appear more affordable or to reduce borrowing, since doing so can limit financial aid in ways that amplify students’ financial pressures and increase the risk of food and housing insecurity. Developing a menu of rigorous methodological approaches for institutions to use in generating living costs estimates reliably and accurately may be a useful approach; multiple approved approaches would help students understand the true financial implications of their choices, while still allowing some flexibility for institutions.

Currently, institutions can arrive at estimates through a variety of means, but they do not have to share how they do so. Without “showing their work,” there is very little transparency into whether the numbers are unrealistic. Students and their families—not to mention policymakers and taxpayers—deserve this transparency.

New regulations could require institutions to publish a description of the process used to develop cost estimates in plain-language terms, including on the same websites currently used to disclose COA for different student groups. These websites should include information about how to pursue COA adjustments for students with special circumstances. Doing so would provide students greater insight into overall cost and, where their needs differ from those of their peers, and how to seek a "professional judgement" determination. (A process known as “professional judgement” allows financial aid officers to adjust a student’s COA on a case-by-case basis, but the availability of this option is not always clearly communicated to students.) ED should also have the authority to review an institution’s COA and, if it is demonstrably mismatched with typical student need, levy appropriate sanctions.

Finally, ED should implement changes to its current data collection around COA to align with COA changes in the pandemic-relief legislation, and to improve transparency for students, policymakers, and researchers. In particular, institutions should be required to report room and board expenses for students living with family—a COA component that is left out of current reporting. The exclusion of these costs can create the false sense that students living at home do not incur housing and food expenses and makes living with family appear more affordable than it actually is. Likewise, institutions should be required to report the methods used to develop each component of their COA estimates so that policymakers can understand the implications of different approaches.

COA was long overdue for a legislative revamp, and giving the Secretary the authority to regulate COA is a big step toward ensuring students have accurate information about the true financial implications behind various higher education pathways. Over the next few years, it will be important to focus on how to regulate and oversee the cost of attendance calculations in a way that is not overly prescriptive, but that remains fair to students. ED should emphasize regulations that improve accuracy of cost estimates, through greater alignment of COA calculations across colleges, and transparency among institutions to help policymakers identify cases where COA is inaccurate.

COA is a critical piece of information for students evaluating their college options, and they deserve accurate, reliable, and transparent information about the total expenses they will face. With the newfound ability to regulate COA, ED has an opportunity to make institution’s COA estimates more reliable while still preserving some flexibility for both institutions and students. With clear and precise estimates of the true cost of college, students, policymakers, and the public can better understand - and address - the full extent of affordability barriers created by insufficient financial support to students.

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