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For some incoming college students, the hard part isn’t getting that acceptance letter – it’s figuring out what the financial aid award letter means if you believe an analysis by New America and uAspire. Analyzing more than 11,000 of those letters revealed financial aid isn’t enough to pay for college for some people, but the study also found that financial aid letters can be quite confusing.
Why This is an Issue
When someone is trying to figure out how to pay for college, it gets much harder to figure out affordability without an understanding of financial aid packages. After the Free Application for Federal Student Aid (FAFSA), you should and need to understand how much will be covered by federal aid. Knowing this is the first step to understanding whether you’ll need to consider other options. You may need to cover the rest of tuition out of pocket. You may need to find other financial aid sources, or you may need to select a cheaper school to attend. These are all vital decisions, and a clear, upfront understanding of financial aid is a crucial aspect to making these decisions.
It can be difficult to make higher education affordable for everyone, but much can be done to make financial aid award letters easier to interpret. Doing so should theoretically lead to better, more-informed decisions on attending college.
What Can Be Done (and the Stats to Back It Up)
The survey offered several ways to improve upon financial aid letter transparency after several statistical observations.
Financial aid letters can be improved by making sure they spell out the total cost of college education. Over one-third of the letters surveyed didn’t provide an encompassing look at the full cost of education with financial aid factored in.
More specifically, 40 percent of institutions didn’t give a clear calculation of how much money students would be expected to pay out of pocket. Furthermore, when a school did calculate those costs, calculation methodologies were inconsistent across the board.
Another notable problem is inconsistent or misleading language.
For example, instead of simply saying “unsubsidized student loan,” the letters collectively contained 136 different names for the loan. 15 percent of the letters called a Parent PLUS loan an “award” which is misleading. On some occasions, the word “loan” was never mentioned.
The analysis also revealed that various different types of student aid were indiscriminately lumped together in 70 percent of the letters. More specifically, the letters didn’t explain the differences between work-study, loans, grants, and scholarships. Additionally, 70 percent of the letters that offered work-study did not explain the concept of work-study aid.
Students who receive aid letters are often not given instructions about what they should do next, whether they plan to attend that college or turn down the offer.
Because of these inconsistencies and practices that make financial aid award letters hard to decipher, New America has pleaded the case for changes to be made by federal mandate.
Author: Shannon Serpette
Shannon Serpette is a mother of two and an award-winning journalist and freelancer who lives in Illinois. When she’s not spending time with her children, she is often pursuing her favorite hobbies – running, metal detecting, kayaking, and reading about personal finance.