A new federal study has shown that colleges fail to provide students with clear and consistent information about financial aid packages. These consequences can lead to severe disruption, such as dropping out of school for some students.
Melissa Emrey-Arras who was the lead researcher for the U.S. Government Accountability Office’s research, stated that colleges are not giving students the information they require. “And colleges that don’t provide this information can allow students to make important decisions for their future.”
She said that students could leave school if they make a wrong decision due to unclear aid information. This can lead to them borrowing more money than they need, not buying textbooks or cutting down on food, and can even cause them to stop going to school.
According to the GAO report, offer letters are confusing at best and misleading at worst.
Here’s how it works: After students are accepted to college, they receive a document from the school stating how much financial aid they are eligible for. It is usually a combination of federal student loans, federal scholarships, work-study, grants and scholarships.
These documents are used as marketing material. Some numbers are bolded (you won a $20,000 scholarship! Some numbers are bolded (you got a $20,000 scholarship!). While others are missing (it runs $70,000 per year!). Students have a hard time comparing offers from different schools because every letter is different.
In a joint statement, Rep. Virginia Foxx (R.NC) and Rep. Lisa McClain(R.MI), said that “this is egregious” and was unacceptable. They have introduced new legislation to make financial assistance offers transparent and easier to compare. Foxx, the House Education Committee’s top Republican, requested the GAO report.
This problem has been a problem for students for many years.
“A lot of institutions use their financial aid offers to present them in a rosiest financial way to get students to enter,” Rachel Fishman, who coauthored a 2108 report to New America, a public policy thinktank that examined more than 11,000 award letter from more than 900 colleges. Most of these were four-year institutions. It makes college seem more affordable than it is, which is a problem for families and students. That’s a problem.
McKenna Hensley
A new GAO report examined more than 500 financial aid applications from nationally representative colleges across the country and found that many colleges failed to follow best practices.
The GAO, for example, found that 91% of colleges did not provide an adequate net price. This is the amount the student or their family will have to pay out-of-pocket to attend college, even if they are borrowing. Over half of the colleges didn’t include costs, and around a quarter (22%) did not list college costs in financial aid offers.
Many people failed to clearly identify what aid money was paid for – grants, scholarships – and what the student would need to repay it.
The U.S. Department of Education provided a template to help students with student aid letters in its past guidance. The GAO discovered that only 3 percent of colleges used the template to communicate with students. Nearly two-thirds did not use it at all.
Emrey-Arras says, “If you have a student applying to multiple schools, it can be very difficult to compare offers between schools if they don’t have comparable information.”
Fishman and Emrey–Arras both point out other financial situations in which consumers make big financial decisions. For example, taking out a mortgage or a card. Or buying insurance. These transactions require disclosures and standard information that can be used to assist individuals in making informed decisions.
Federal college loans do not require that students receive counseling prior to their money being disbursed. To understand their responsibilities, as a borrower.
Emery-Arras says that students usually get an entrance call counseling once they receive the financial aid offer. It doesn’t happen at the moment where the student receives the financial aid offer, and then uses that information to decide which college to attend.
Emrey-Arras states that it is a difficult task for the GAO recommend Congressional action. However, the report suggests that this is the best next step.
She says, “This issue is not affecting only a few colleges or prospective students or families.” This issue is affecting 91% percent of American colleges. We believe Congress should require colleges to give this standard information to prospective students as well as their families.
This issue has been addressed in the past. The Understanding the True Cost of College Act was first introduced in 2012 . was reintroduced last Year. It aimed to create a common disclosure of colleges for families and students so they could compare financial aid offers apples-to-apples.
It is not clear when or if Foxx will bring up his new bill, the College Cost Transparency and Student Protection Act.
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Transcript:
AILSA CHANG HOST:
Okay. It’s no secret that many college graduates end up with large student debts. But how did they do it? New federal research shows that colleges are partly to blame for confusing and misleading financial aid letters sent to students.
Elissa Nadworny works at NPR’s education desk. Hey, Elissa.
ELISSA NADWORNY BYLINE: Hi.
CHANG: OK. How does the student debt crisis relate to these letters from colleges regarding financial aid?
NADWORNY – When a student is accepted to college, they receive a letter from the school explaining what money they are eligible for in grants, scholarships and work study. Each college’s letter is different so it can be difficult to compare. They are branded by colleges, such as with school colors. There are many exclamation points. These are part of the pitch. They want students to enroll. Sometimes, as you mentioned, they can be misleading. Rachel Fishman, a New America researcher, examined 11,000 of them several years ago.
RACHEL FISHMAN – Nobody does everything perfectly. There were also a few who did things horribly wrong.
NADWORNY: This issue has been around for a while. In 2019, the Department of Education gave specific instructions to colleges and asked them to clean up their act. You must clearly state how much the award will cost, what is required in return, and what money is free. Don’t call it an “award” because it’s not. Today, however, the U.S. Government Accountability Office (a federal watchdog) released a report that showed colleges aren’t following the department’s guidelines. Letters are still confusing and misleading.
CHANG: Interesting. How big is the problem?
NADWORNY : The GAO discovered that 91% of colleges did not include the net cost or miscalculated it. This is how much the student will have to pay out of pocket. A majority of students didn’t give any information about college costs.
CHANG: Wow.
NADWORNY: Melissa Emrey Arras, who was in charge of the GAO’s review says that this has huge consequences.
MELISSA EMERY-ARRAS: When students enroll in schools, they can be faced with huge surprises. To cover unexpected expenses, they may need to borrow large amounts of money. If they don’t anticipate the cost, they may have to cut back on food and other essentials. These costs could even lead to them dropping out of college.
NADWORNY: She points out other times when consumers make big financial decisions, such as taking out mortgages or credit cards, and buying insurance. These have common legal requirements and standardized information that can help consumers make the right decision. This is not true for student financial aid.
CHANG: What now? What recommendations does the GAO make?
NADWORNY – The GAO stated that colleges had not followed the Department of ED guidance and left Congress. Here is Emrey-Arras’s GAO report.
EMREY ARRAS: We believe Congress should require colleges to provide clear and consistent information to prospective students and their parents.
NADWORNY – This is a continuation of past legislation. Today, however, Representative Virginia Foxx from North Carolina is the top Republican in the House Education Committee. She stated that colleges’ actions are “egregious” and “unacceptable”. She was actually the one who requested this research. Today, she introduced new legislation to make offer letters more transparent.
CHANG: This is NPR’s Elissa Naidworny. Thank you so much, Elissa.
NADWORNY: Ailsa, thank you.
NPR Transcript, Copyright NPR
