The Obama administration is releasing today the final version of a model financial-aid award letter that colleges can use to provide potential students with standardized information on their true costs of attendance, as well as any available grants, loans, and other financing options, such as Work-Study or military benefits.
Use of the model letter, also known as the “Financial Aid Shopping Sheet,” is voluntary, but the U.S. Secretary of Education, Arne Duncan, is calling on all institutions to adopt the template. It provides space for colleges to include each student’s total net cost, along with data about median federal borrowing among all students at the institution, average monthly payments for that debt level, and the institution’s loan-default and graduation rates.
The form gives colleges “the opportunity to put the tools of transparency into action,” Mr. Duncan said at a news conference on Monday.
Legislation passed in 2008 to renew the federal Higher Education Act required the Department of Education to come up with a model for how colleges should present cost and financial-aid information to potential students. The Education Department and Consumer Financial Protection Bureau collaborated on the model letter that the White House released today.
“We are standing up for a simple and sensible concept: Students should know before they owe,” Richard Cordray, director of the consumer bureau, said in a written statement. “Too often students receive financial-aid award letters that are laden with jargon, use inconsistent terms and calculations, and make it unnecessarily difficult to compare different financial-aid awards side by side.”
Financial-aid officers have opposed standardization, even as they agree that aid-award letters should be improved.
“While we are pleased that institutions are not required to adopt the Shopping Sheet, we remain concerned with the inflexible standardization of the Shopping Sheet and, more broadly, with the multitude of consumer disclosure initiatives that have been introduced in recent months,” Justin Draeger, president of the National Association of Financial Aid Advisors, said in a written statement. “Institutions need flexibility to design a financial-aid award letter that best meets the needs of their unique student populations.”
The association released guidelines in May on what letters should contain: net cost after grant aid, for example, and links to federal databases that display information, including cumulative indebtedness and default rates at individual institutions.
Consumer-rights advocates, however, have long complained that colleges are given too much leeway on how they put together aid-award letters. Mark Kantrowitz, publisher of the consumer Web sites FinAid.org and Fastweb.com, welcomed the model letter but wished it were mandatory.
“It addresses the four C’s of award letters: clear, correct, complete, and comparable,” he wrote in an e-mail message to The Chronicle. But “to enable comparisons between different colleges,” he said, “it must be mandatory.”
Under an executive order that President Obama issued in April, colleges that accept education benefits for military servicemembers and veterans will have to use the template. And 10 colleges said in June that they would begin using similar letters more generally.
Mount Holyoke College announced on Monday that it would explore the model letter’s effectiveness by adopting it this coming year for a subset of applicants. “Sharing a full range of financial information with prospective students is central to Mount Holyoke’s admission process,” the college’s president, Lynn Pasquerella, said in a written statement. “I hope that this new initiative will prompt institutions throughout higher education to use this evolving tool to share financial information more fully and meaningfully with students and prospective students.”
Secretary Duncan said he expects many colleges to willingly adopt the form for fear of consumer reaction if they do not. “If someone is not willing to be transparent about the costs,” he said, “the question you have to ask is, Why?”
The form could become mandatory for colleges only if Congress passes legislation requiring it. Sen. Al Franken, a Minnesota Democrat, has introduced a bill, the Understanding the True Cost of College Act, that would do so.
