An End to Bad Financial Aid Award Letters

Last week I wrote two college blog posts that included examples of confusing financial aid letters. If you missed them, here they are:

Are These Financial Aid Letters Misleading?

What’s Missing From This Financial Aid Letter?

I received a couple of notes from independent college counselors saying that they were going to use the awards that I highlighted as templates to evaluate their clients’ financial aid offers. Over the weekend, my brother-in-law Mike used the examples to evaluate my nephew’s award at a college in Missouri and he correctly determined that the school was proposing to meet 81% of his son’s need.

Wouldn’t it be so much nicer, however,  if all financial aid award letters were standardized so people wouldn’t have to use some random blogger’s posts to figure out awards? Wouldn’t it be fantastic if the award letter dispatched by George Washington University relied on the same format as Fordham, University of Portland, Columbia and every other school in the country?

Help Is On the Way

For families and counselors who are tired of deciphering financial-aid-offer hieroglyphics, change is coming. The U.S. Department of Education and the new federal Consumer Financial Protection Bureau have been working to develop a model financial aid award letter. This isn’t necessarily the final version, but here is what the feds have come up with so far:

Financial Aid Shopping Sheet

I love the government’s model financial aid award, which is being calling a financial aid shopping sheet.  I particularly appreciate the information on what the future costs of borrowing would be. If you like the award letter — and it is light years better than what’s out there now — or have ideas on how it can be improved — send your comments to the Consumer Financial Protection Bureau.

The Bureau would also like you to rank the features that you think are most important parts of a financial aid offer. You can share your comments and rank the features by clicking here: Consumer Financial Aid Protection Bureau.

A federal standardized financial aid form could be rolled out as soon as 2013. It can come quick enough.

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Lynn is the author of the second edition of The College Solution: A Guide for Everyone Looking for the Right School at the Right Price. The second edition contains about 90% new content including chapters on evaluating schools financially and academically.


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  1. Here’s what I don’t understand:

    Looking at the inadequate need-based financial aid awards offered to my son at 2 good private colleges where he was just admitted, while also hearing from the disappointed parents of other admits to competitive schools and perusing the “I can’t afford to go here” comments from admitted students on college message boards, there seems to be a disconnect between middle class financial economics and financial aid offices. So many of these colleges float the notion that if you can get in, they will help you afford it — if you “demonstrate the need” via the FAFSA. Based on my own personal and anecdotal evidence, this often does not seem to be happening.

    It appears to me that many, many students bright enough to get accepted to some of the most prestigious colleges in the nation are not planning to attend based strictly on the inability to afford their annually escalating price tags, which in the end the colleges are NOT discounting sufficiently as to be within reach the middle class in the Great Recession (which by the way is not over.) I guess I am curious to know what the admissions and financial aid offices think about this? Or do they care? It seems quite cynical.

    Of course they all invoke the “priceless value” of their institution and the need for a family to “make sacrifices” for the good of their child. Fine. Agreed. But still someone is not doing the math. To a family of four making under 125K a year in a high cost-of-living city like Los Angeles or Chicago, where are the parents supposed to get an additional 30-50K a year (depending on financial aid packages) to send Johnny to Great Liberal Arts College or Prestigious U?

    Truth in advertising should probably require these colleges to say, “Unless you are poor enough to qualify for a Pell Grant, figure that (if you get in) you’re going to have to come cup with at least 30K a year to pay the bills here.”

    I presume the numbers crunchers at these places know that the financial aid awards will not be enough in many cases and that a percentage of qualified middle class admits will never be able to send in their deposits, while enough anxious parents will take out a second mortgage and/or drain their retirement accounts as they would if their child needed a liver transplant — while the child himself or herself incurs 30-50K personal debt by graduation. It is simply disingenuous (and bad behavior) for pricey colleges to encourage talented middle class kids to apply and then look the other way when the kids try to figure out how to ACTUALLY afford it. Come to think of it, it’s appalling.

  2. Hi Denise. Excellent point. Most students do not graduate in four years, which I’d argue that the vast majority of families of teenagers don’t understand.

    The total owed would include interest. The interest continues to build while a child is in school except for the subsidized Stafford — the federal government covers the interest while the borrower is still a student.

    Thanks for visiting my blog!

    Lynn O’Shaughnessy

  3. Lynn,

    Very timely discussion on Financial Aid Award letters! Great that the draft federal format includes loan repayment amounts. Would be nice if they would add rate of interest for the loans. Hope you got those plane reservations for Newark — I’m looking forward to hearing you at the HECA Conference.

    Deb Clay
    Peoria, IL

  4. Hi Lynn,
    This is a huge improvement that I’m sure most parents will welcome. The only thing I miss is seeing it explicitly stated that this is what you owe if you graduate in how many years? 4? How much if it takes 6 years, since that is a common scenario these days, That $708 per month is more likely to be $1000 per month if it takes you 6 years, correct? Also, their math formula would be nice to include, since their total owed does not equal total loan amount (I’m assuming it’s interest).

    After the examples you gave us, though, this is great!

  5. Hi Lynn,
    This is a huge improvement that I’m sure most parents will welcome. The only thing I miss is seeing it explicitly stated that this is what you owe if you graduate in how many years? 4? How much if it takes 6 years, since that is a common scenario these days, That $708 per month is more likely to be $1000 per month if it takes you 6 years, correct? Also, their math formula would be nice to include, since their total owed does not equal total loan amount (I’m assuming it’s interest).

    After the examples you gave us, though, this is great!