Tomorrow the Department of Education will convene a public meeting to discuss the development of its model college financial aid award letter as required by the Higher Education Opportunity Act. This is the department’s first step toward creating a model financial aid notification format that could help prospective students better understand their options for paying for college.
The decisions students make based on their financial aid award packages can saddle them with debt that will follow them the rest of their lives. That’s why it’s so important to improve the format of financial aid letters. A new model letter has the potential to help students and parents make more informed, financially sound choices about where to go to college. But the Department of Education must make good choices about what belongs in these letters, and congressional leaders must work to make them mandatory.
Right now, colleges can format their financial aid letters in any way they choose. The letters vary so much that it is very difficult to compare them across colleges.
Some colleges list both tuition and estimated living expenses as part of the cost of attendance, whereas others include only tuition. Some colleges subtract optional student loans from the cost of attendance when calculating a student’s out-of-pocket costs. Others subtract only grants from the cost of attendance.
At best the letters are difficult to compare, and at worst they present a misleading picture of what college attendance will actually cost.
There are a number of changes the Department of Education can make to ensure financial aid letters are more useful and comparable, like ensuring a stark separation between grant aid and loans and including estimated loan payments. But the most important change is one of perspective.
College administrators must stop thinking of the letters as a way to convince students that college is affordable. They must realize that the financial aid letter should be part of a dialogue among the federal government, the college, and the student about how to pay for college. Financial aid letters should lay out a budget for the expenses a student will incur in attending college and present a menu of options for paying these costs.
Once the department develops their model form, it will be Congress’s responsibility to make the form as useful as it can be. The Higher Education Opportunity Act mandated the creation of a sample financial aid letter but colleges may choose whether they wish to use it. If the biggest problem with financial aid letters is the inability to compare costs and financial aid options across colleges, then the model letter will be of little use if it is not mandatory.
CAP’s official comments on the model aid form can be found here.
Julie Margetta Morgan is a Policy Analyst with the Postsecondary Education Program at the Center for American Progress.