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College aid letters are misleading students and need a legal fix

Updated December 5, 2022 at 10:41 PM ET

New federal research says colleges are failing to give accepted students clear and standard information about financial aid packages. The consequences can be extremely disruptive, including, for some students, expulsion from school.

“Colleges are not providing students with the information they need,” said Melissa Emrey-Arras, who led the research by the US Government Accountability Office. “And if colleges don’t do that, students can make decisions that are consequential for their future.”

In addition to the possibility of dropping out of school, she said, making the wrong decision because of unclear aid information can also lead to students borrowing more than they need, which can affect them for years, or not buying textbooks, or can even cut back on food.

The GAO report found that offer letters can be confusing at best, and misleading at worst.

Here’s how it happens: When students are accepted to college, the school sends a document explaining how much financial aid the student is eligible to receive. Usually, these are a combination of grants, scholarships, work study, and federal student loans.

These documents appear as marketing material. Some numbers are in bold (you won a $20,000 scholarship!) while some numbers are missing (it costs $70,000 a year!). And each letter looks different, making it really difficult for students to compare offers from different schools.

“This is terrible and unacceptable,” said Rep. Virginia Foxx (R-NC) in a joint statement with Rep. Lisa McClain (R-MI), who introduced new legislation to make financial aid offers transparent and easy to compare. “Colleges and universities must do better.” Foxx is the top Republican on the House Education Committee and requested the GAO report.

The problem has plagued students for years.

“Many institutions use their financial aid offerings as a way to present them in the rosiest financial light to get students to enroll,” said Rachel Fishman, who co-authored a 2108 report for New America. a public policy think tank. which analyzed more than 11,000 grant letters from more than 900 colleges, most of which were four-year institutions. “And what that ends up doing for students and families is that it makes it seem like college is more affordable than it really is. And that’s a problem.”

The new GAO report looked at more than 500 financial aid offers from a nationally representative selection of colleges across the country, and found that colleges repeatedly failed to follow specific best practices.

For example, the GAO found that the vast majority of colleges — 91% — do not include an adequate net price, which is how much out-of-pocket the student or family would have to pay to attend, including through loans. More than half did not specify costs and about a quarter (22%) of colleges did not provide any information about college costs in their financial aid offers, only list aid.

Many failed to clearly label which aid money was free – such as grants – and which students would have to pay back.

In previous guidance to colleges, the U.S. Department of Education provided a template for student aid letters. But the GAO found that only 3% of colleges used this template as their primary communication with students, and about two-thirds did not use the template at all.

“If you have a student or a prospective student applying to multiple schools, it makes it very challenging to compare offers across schools if they don’t have comparable information about those schools,” says Emrey-Arras.

Both Fishman and Emrey-Arras point to other situations when individual consumers make major financial decisions, such as taking out a mortgage or a credit card and purchasing health insurance. Those transactions require legal disclosures and standardized information to help individuals make an informed decision.

But federal college loans only require that students receive counseling before disbursing their money to understand their responsibilities as a borrower.

“Students usually have that entrance call counseling after they get the financial aid offer,” says Emery-Arras. “So it doesn’t really hit the point where the student gets that financial aid offer and then uses it to make a decision about which college to attend.”

Emrey-Arras says it’s a high bar for the GAO to recommend Congressional action, but the report says it’s the best next step.

“This is not an issue that affects a small number of colleges or a small number of prospective students and families,” she says. “This is an issue that affects 91% of colleges in the United States. We think that Congress should require colleges to provide this clear and standard information to prospective students and their families.”

Legislation to address this has come in the past. The Understanding the True Cost of College Act, first introduced in 2012 and reintroduced last year, aimed to create a common disclosure for colleges so families and students could make apples-to-apples comparisons of can make financial aid offers.

It’s unclear when or if Foxx’s new bill, called the College Cost Transparency and Student Protection Act, could come up for a vote.

Copyright 2022 NPR. To see more, visit https://www.npr.org.

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