Nothing Has Changed with Financial Aid Offers. Congress Must Act.

Today the Government Accountability Office (GAO) released a report that felt all too familiar. The financial aid offers (also known as award letters) that colleges and universities send to students that detail personalized cost and aid information are a challenge for most families to navigate. The way in which colleges and universities communicate this information is mediocre at best, and many times can be downright confusing and misleading.

Almost twenty years ago, I was a high school senior. I remember the excitement of applying to college, getting those acceptance letters, and making the decision of where I planned to spend the next four years of my life. With help from my dad, I filled out the paper FAFSA, the federal application for financial aid. Then the financial aid offers rolled in.

I narrowed my choices down to a couple of schools—one small liberal arts college sent me a frilly notification on beautiful paper, in an important looking folder that told me that I had qualified for over $20,000 in merit aid and several thousand dollars in federal student loans. The other, from a state school, was no frills and notified me that I only received federal loans as an out-of-state student.

This seemed like a no-brainer—I had gotten a car’s worth scholarship to a school located in one of my favorite cities. But the price information wasn’t there. My dad and I used Excel to input the data from the two offers, including tuition pricing and cost of living information. As it turned out, even with a substantial scholarship, the price of the private liberal arts college was so high, the state school, even as an out-of-state student, would be $20,000 cheaper. The decision at that point became obvious.

Then ten years ago, I was working at a TRIO Education Opportunity Center located in the basement of Boston’s public library. I helped low-income, predominantly first-generation students fill out the FAFSA, this time on the computer, and navigate financial aid offers. Nothing had really changed with financial aid offers since I received them as a high school senior. We would open up Excel to gather information and standardize it so we could make apples-to-apples comparisons.

Helping low-income and first-generation students navigate the complex college-going process, including obtaining financial aid, was one of the driving reasons I decided to go into policy and advocacy. Financial aid offers became a pet issue of mine, and finally in 2018 with an amazing team of researchers and a collaboration with uAspire, an organization that counsels students, we published a groundbreaking report that finally revealed in great detail just how lousy colleges and universities were at communicating their price and aid options.

Our research revealed several serious issues with financial aid offers. Over a third of the offers we looked at contained no information on price. For one type of common loan, the federal direct unsubsidized loan, we found there were over 130 different ways institutions labeled this loan, including several institutions not calling it a loan at all. Most institutions lumped all types of aid together like loans, grants, and work study even though they have very different terms and conditions. And some institutions used the Parent PLUS loan, a loan that a parent has to apply and be approved for, to “zero out” an aid offer making it seem like students received a full ride. Worse were the offers that zeroed out an offer with Parent PLUS loans that also didn’t call it a loan.

Our report brought a lot of attention to the issue. Even though there had been efforts since 2012 from the Obama Administration and in Congress to standardize financial aid offers so that students could get the information in the right format and make apples-to-apples decisions among the institutions where they’d been accepted. Until our report, those efforts largely stalled out due in great part to colleges and universities lobbying hard against any standardization, saying that the problem was related to a few bad actors. But once our research was out there, showing widespread problems with financial aid offers, Congress started taking note.

Indeed, former Senator Lamar Alexander (R-TN), chair of the Senate Health, Education, Labor, and Pensions Committee voiced support for standardization at an event held at the American Enterprise Institute about reauthorization for the Higher Education Act, saying, “with so many students receiving letters every year that do not make it clear what you have to pay back and what you don’t, I think a requirement is a good idea.” He said this despite his general skepticism of federal mandates.

Meanwhile, the National Association of Student Financial Aid Administrators (NASFAA), the membership organization of financial aid administrators and also the primary lobbyist against meaningfully standardizing offers, made clear that their members were required to follow their code of conduct which had several requirements about financial aid offers. And the U.S. Department of Education issued guidance to colleges and universities making clear what the best practices are for financial aid offers (guidance that still stands). Congress also acted—the Understanding the True Cost of College Act, which has been around since 2012 and is the gold standard piece of legislation for standardizing financial aid offers, was reintroduced with significant revisions based on research.

New America then took our research one step further to understand the solution. We convened stakeholders, including students, counselors, financial aid administrators, and researchers, to prototype the best ways to design financial aid offers. We then consumer tested those templates with students and parents and determined the best ways to convey cost and aid options.

Yet even with Education Department guidance, a strong code of conduct from NASFAA, and best practice consumer research from our organization, not to mention the multiple task forces, convenings, and research dedicated to improving financial aid offers, the GAO report out today shows NOTHING HAS FUNDAMENTALLY CHANGED WITH FINANCIAL AID OFFERS. Institutions still neglect to list price on their offers, and when they do a vast majority understate price. They lump aid together, sometimes not even calling a loan a loan. And only 15 percent made changes based on guidance from the Education Department which is the most pressure the Department can exert in absence of a Congressional mandate.

We have made no progress from when I first personally faced this issue in 2003 as a high school senior, even though we’ve made considerable progress on other parts of the financial aid process. The FAFSA, for example, looks totally different from when I filled it out on paper, and when I helped others fill it out on the computer. We’ve aligned FAFSA’s time horizon with the admissions cycle, we’ve introduced the IRS data retrieval tool, and we’ve made incredible strides simplifying the form.

Despite a preponderance of evidence of how confusing and misleading financial aid offers are, and plenty of evidence about how to fix them, the needle hasn’t moved at all. When NASFAA told members to adhere to a code of conduct, they didn’t listen. When the Education Department issued guidance to institutions about best practices, the institutions didn’t adopt them. The message has been broadcast, and it has not been received.

Today, the GAO has called Congress to act as it is clear that that is the only way consumers will see meaningful change with financial aid offers. A college education is one of the most expensive transactions a student and family can make, and they deserve to have a common disclosure understanding price and financial aid options. Other complex consumer transactions from mortgages, to health insurance, to cars all have required comparison disclosures. Higher education should be no different.

It is time to put this issue to bed once and for all and pass the Understanding the True Cost of College Act. If I am using an Excel or Google Sheet to determine net price with my children about a decade from now, we will have utterly failed students and families.

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