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The US Education Department has just issued suggestions to schools on the wording and content of financial aid offers sent to students. The body of the notice is shown below. The take-away is that there are no set guidelines that schools must adhere to when designing financial aid offers. Also, that schools often send offers that are incomplete, misleading and/or just downright deceptive. This guidance from the Education Department reinforces the fact that it is critical for families to determine the NET PRICE for each target school. Our recent webinars on “Decoding and Comparing Financial Aid Awards” and Now that I’ve deposited – How Do I Pay ?” address in detail how to determine NET PRICE and what resources are available to help your in family pay for college.
Author: Federal Student Aid
Subject: Recommendations: What Postsecondary Institutions Should Work to Avoid When Issuing Financial Aid Offers
The U.S. Department of Education recognizes that stakeholders within the postsecondary education community continue to work to reach agreement on standard terminology and format for financial aid offers. As that work continues, below is guidance from the Department on what schools should avoid when issuing financial aid offers:
1. Avoid calling your financial aid offer an “award” and avoid calling it a “letter.” Loans are not awards. Work-study is not an award, it is the potential for employment that offers earnings to students. Using a term like “financial aid offer” or “college financing” is clearer. Given that many institutions deliver these offers via electronic communication, calling them “letter” can also be confusing.
2. Avoid issuing a financial aid offer that does not include cost of attendance. For any student and/or family to be able to make an informed decision, the amount of aid received must be compared to the total cost of attendance in order to determine the student/family financial contribution.
3. Avoid listing the cost of attendance without breaking it down into clear components. For students and families to be able to plan how to cover costs, the provided cost of attendance needs to be transparent about what is and is not included. While basic needs like food and shelter are critical, other keys costs such as books, supplies, medical insurance and transportation also need to be anticipated as students and families determine if a school is a financial fit for them.
4. Avoid listing grant and/or scholarship aid, loans, and work-study together. Listing grant and/or scholarship aid, loans and work-study together can lead students and families to confuse the terms and their specific requirements. Listing them separately makes it clear what is a loan (needs to be paid back) what is a grant or scholarship (does not need to be repaid), and what constitutes as work-study (must be earned by securing a job and working to receive it).
5. Avoid listing student loans without clarifying the source (federal, state, institutional, or private). Federal student loans come with important protections for students and families, and often lower long-term interest rates. Accurately titling loan sources helps students identify which loans come with these protections.
6. Avoid listing Parent PLUS loans with student loans. Parent PLUS loans are different than student loans and involve higher risk. Repayment starts immediately for parents who borrow PLUS loans, not after the student graduates from college, and PLUS loans include higher origination fees and interest rates. In addition, a parent must have no adverse credit history to qualify. Separate PLUS loans from student loans and make it clear how the requirements for these loans are far different than other loans and further application is required to confirm eligibility.
7. Avoid issuing a financial aid offer without CRITICAL next steps. Especially for first-generation families, the financial aid process can be intimidating, often with deadlines and fees that are not intuitive. Along with the financial aid offer, include the specific next several steps that a student/family should follow to accept or decline financial aid.
8. Avoid issuing a financial aid offer without net cost calculated. Net cost is the difference between the total cost of attendance (COA) and all grant/scholarship aid received. Not including net cost is confusing to students and families and makes comparing financial aid offers very difficult, if not impossible.
The Department feels strongly that avoiding these things will improve the clarity, transparency, and basic understandability of financial aid offers for students and families. When students and families understand financial aid offers, they make informed decisions that help to increase college enrollment, persistence, completion, and successful repayment of student loans.
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