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Hoops and Hurdles of Financial Aid: How Misleading Information Costs Students

Financial Wellness Policy and Advocacy
February 13, 2020 Alexa Wesley Chamberlain NASPA

This is the final part of a three-part series about aspects of financial aid policies that misalign with students’ lived experiences. 

As illustrated in the first and second installments, there is a need to modernize financial aid policies and create a system to better fit the diverse needs and preferences of today’s students. This final installment examines the challenges students face when it comes to information about financial aid awards and the costs of attendance.

Cost of Attendance Estimates

The way institutions calculate the cost of attendance (COA) can significantly vary and tend not to accurately account for regional differences and off-campus living scenarios. The US Education Department’s guidance on the topic suggests that institutions “use reasonable methods” to generate average local costs, but it does not specify how to calculate estimates in a consistent, transparent, and comparable way. Without clear federal guidance about how to calculate these costs, institutions are left to their own devices when it comes to measurement decisions. The processes used across campuses can differ, resulting in inconsistent estimates that hinder a student’s ability to compare institutions and their complete costs. An underestimated COA can obscure the full costs of college and limit the amount of aid that a student is eligible to receive. Having an accurate and complete understanding of COA is critically important to students when they are deciding where to enroll and how to appropriately plan out their finances.

Financial Aid Offers

The challenges of COA estimates are also felt in the financial aid offer letter context. These offer letters are given to eligible students by every college and university to which they are offered admission. Institutions format and communicate aid information in various and unclear ways. Students are left to decipher offers that are often riddled with confusing jargon, misleading information, inconsistent COA estimates. In a New America report exploring the issue, researchers find that aid letters tend to omit living costs or fail to make distinctions about whether available sources of aid are free, borrowed with interest, or earned through a part-time job. Approximately 70 percent of the offer letters lumped loans, federal work-study, and grant aid funds altogether. The report also found that the term used for a loan was listed in 136 unique, mostly cryptic ways, such as “Federal UnSub-Direct Stafford” and “Fed Direct USub Stafford S/S 1.” Ambiguous information can lead students to make false comparisons and poor financial decisions with long-lasting impacts.

Proposals for Standardization

Students need accurate, reliable information about the real prices and costs of college transparently communicated to them. The US Education Department (ED) could leverage existing federal datasets to offer guidance to institutions about how to calculate living costs, especially for those students who are living off-campus or who might be living with their families. Standardizing how certain costs are calculated should give students a better picture of what to expect when comparing institutions. Improved accuracy about an institution’s COA should also help with the calculation of a student’s level of unmet need and thus the amount of aid they are eligible to receive.

Another approach to improving transparency is through federal standardization of consumer-tested terms and definitions in financial aid offer letters. In March 2019, Senators Grassley (R-IA), Smith (D-MN), and Ernst (R-IA) introduced a bill that would mandate the use of a standard financial aid award form with strict standards around language and formatting. The Understanding the True Cost of College Act would require ED to work with a variety of constituencies in higher education to create the form and test it for groups of students, families, institutions, and counselors. While the bill hasn’t passed the Senate committee, its introduction signals the issue’s growing importance.

Strategies for SA Pros

Taking a student-focused approach to the way financial aid policies, processes, and related information are communicated is an important step toward reducing barriers for students. Student affairs practitioners could help elevate student voices and promote change by engaging with student advocacy groups at the local, state, or national level. Working with such groups could provide students with opportunities and tools to engage in advocacy around changes to policies that impact them the most. Student affairs practitioners have the opportunity to share their perspectives and student stories to help shift mindsets and strengthen reform efforts.