Often, students face a confusing array of options as they consider where to go to college and how to finance their education. Resources like the College Scorecard and the College Financing Plan are critical mechanisms for ensuring that students have transparent, clear-cut information about their options. However, many institutions provide supplementary information that is not always clear to students and their families. Alongside the update to the College Financing Plan published today, the Department is updating its guidance to institutions of higher education about what they should include and avoid when issuing financial aid offers:
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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” is clearer. Given that many institutions deliver these offers via electronic communication, calling them “letters” can also be confusing; “offers” provides clearer terminology for students.
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Always include cost of attendance in a financial aid offer. 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. If financial aid offers exclude the total cost of attendance, students and families will be unable to contextualize the offer.
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Break down cost of attendance in ways that help students understand costs. 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, and what is a fixed cost and what is an estimated cost. Break out individual components of the cost of attendance including tuition and fees, housing (on-campus and off-campus), and meals. Other key costs, such as books, supplies, medical insurance, and transportation, also need to be included so that students and families can consider them as they determine if a school is a financial fit for them. Institutions should also clarify whether the cost of attendance is based on enrollment of a full- or part-time student, and whether tuition and other expenses are for an in-state or out-of-state student, if applicable.
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List grants and scholarship aid, loans, and Federal Work-Study separately. Listing grant and/or scholarship aid, loans, and Federal Work-Study separately will help students and families understand the terms and specific requirements of each category. Specifically, listing them separately makes clear what is a grant/scholarship (aid that does not need to be repaid), what is a loan (aid that needs to be repaid), and what constitutes work-study (aid that must be earned by securing a job and working to receive it). Institutions should clearly label each category, and sum the individual line-items within each to provide a total for that category.
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Explain and calculate the estimated net cost for students in the financial aid offer. Net cost is the difference between the total cost of attendance (COA) and all grant/scholarship aid received. Students should be able to easily understand how the calculation was made, and institutions should provide this standard estimate of students’ out-of-pocket and debt-financed costs. Excluding net cost is confusing to students and families and makes comparing financial aid offers very difficult, if not impossible. Additionally, institutions should not present the net cost information in ways that may confuse students, such as subtracting private or Parent PLUS loans from the cost of attendance and/or zeroing out the cost with those types of loans.
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Separate out other options for repaying the net cost. Apart from federal student loans, provide a list of other options available to students, which may include tuition payment plans; state, institutional, or private loans; or federal Parent PLUS loans, for which a dependent student’s parents may apply, among other possible options. Federal student loans are available to all undergraduate students, are not subject to a credit check or other underwriting, and come with important protections for students and families; the same is often not true of private, institutional, or Parent PLUS loans. Institutions should name these other options separately from federal student loans, without an associated dollar amount for each, noting that students need to separately research the terms and conditions of each.
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Describe critical next steps in the financial aid offer. 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.
The Department feels strongly that doing 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. If your institution does not already, we also urge you to consider adopting the Department of Education’s College Financing Plan, which incorporates the principles outlined above. To adopt the CFP, please review the information on this website: https://www2.ed.gov/policy/highered/guid/aid-offer/index.html.