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Standardizing Financial Aid Award Letters as College Cost Disclosures

Standardizing Financial Aid Award Letters as College Cost Disclosures. Mark Kantrowitz Publisher of Fastweb and FinAid October 10, 2012. Nutrition and Energy Labeling. Monroney Window Sticker (Cars). Schumer Box (Credit Card Solicitation). Credit Card Act of 2009 (Statements).

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Standardizing Financial Aid Award Letters as College Cost Disclosures

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  1. Standardizing Financial Aid Award Letters as College Cost Disclosures Mark Kantrowitz Publisher of Fastweb and FinAid October 10, 2012

  2. Nutrition and Energy Labeling

  3. Monroney Window Sticker (Cars)

  4. Schumer Box (Credit Card Solicitation)

  5. Credit Card Act of 2009 (Statements)

  6. Combined Mortgage Disclosure

  7. Private Education Loans (TILA Reg. Z)

  8. 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

  9. 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

  10. 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

  11. 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

  12. Example Problematic Award Letter

  13. Improved Financial Aid Award Letter

  14. Proposal Comparison - Agreement

  15. Proposal Comparison - Disagreement

  16. Proposal Comparison – Not Specified

  17. Financial Aid Shopping Sheet

  18. Thank You! Mark Kantrowitz’s student aid policy analysis papers may be found at www.finaid.org/studentaidpolicy Follow him on Twitter at @mkant

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