GAO highlights opportunities to improve accuracy, transparency in financial aid packages

To prevent college students and their families from facing unexpected college costs or falling deeper into debt, higher education institutions need to better communicate college costs in financial aid offer letters, the Government Accountability Office (GAO) says in a new report. There is no standard format that schools use in notifying accepted students about their financial aid package—often a combination of grants, scholarships, work-study, and federal student loans. An offer letter from one school may look entirely different than one from another. This inconsistency has made it difficult for students to compare offers and select a school that meets their financial needs, The Chronicle of Higher Education reports.

10 best practices for financial aid offers

In its analysis of 522 financial aid offers from a nationally representative sample of colleges, the GAO estimated that 63% of colleges followed no more than half of 10 best practices identified by the U.S. Department of Education, the Chronicle reports. No college followed all 10 best practices for providing clear and standard information in financial aid offers, which include labeling the type of aid (grants, loans, and work-study) offered, providing total cost of attendance that includes key costs, and estimating the net price (by excluding gift aid from key costs).

The GAO found that 91% of colleges understate or do not include an adequate net price: the amount students need to pay out-of-pocket, including earnings from work-study or funds from loans and excluding grants and scholarships. Twenty-two percent of colleges do not provide any information about college costs in their financial aid offers.

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“Colleges are not providing students the information they need,” Melissa Emrey-Arras, who led the GAO research, told NPR. “And if colleges don’t do that, students can make decisions that are consequential for their futures.”

A push for standardized award letters

Higher education organizations, including The National Association of Student Financial Aid Administrators (NASFAA), have called on colleges to make financial aid information less confusing and more uniform across institutions, Higher Ed Dive reports. However, those efforts have not yet led to widespread changes.

In 2012, the U.S. Department of Education asked institutions to adopt a standardized form, now known as The College Financing Plan, to notify students about their financial aid packages. Yet, the GAO report shows that only 3% of colleges use that template for student aid letters as their primary communication with students. Bipartisan legislation to clarify the format of offer letters has been stalled in Congress since 2019.

Recently, the Paying for College Transparency Initiative, a group of 10 higher education associations led by the former president of the Association of Public and Land-grant Universities, banded together to create a task force focused on standardizing financial aid offers with support from the American Council on Education, National Association for College Admission Counseling, and NASFAA.

The GAO report also makes the case for federal legislation standardizing financial aid offers to follow best practice standards. “Without such action,” the report says, “Congress will not be able [to] ensure students and parents receive the clear and standard information they need to make more informed decisions about college.”

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