Imagine you’ve just been accepted to the college of your dreams. At first you feel elation, but then anxiety sets in — will you and your family be able to afford it? Since financial aid packages often blur the line between grants and loans, it might be hard to tell. A $40,000 "award" at one school might seem like a much better deal than a $20,000 package at another — unless you realize the larger "award" consists mostly of loans. With borrowing and loan default rates on the rise, aid packages have huge consequences for students’ educational and financial lives.
In response, the U.S. Department of Education recently unveiled a "Shopping Sheet" that standardizes the way financial aid packages are presented to students. This allows students and parents to easily compare the true cost of one college to another. But institutions don’t have to use the Shopping Sheet, and the National Association of Student Financial Aid Administrators (NASFAA), a powerful industry trade group, is trying to make sure they never do.
NASFAA should be an influential advocate for the Shopping Sheet. Part of its mission is to support policies that increase student access and success. But when the Shopping Sheet was recently unveiled by the Department of Education, NASFAA’s president, Justin Draeger, issued the following statement:
"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. Institutions need flexibility to design a financial aid award letter that best meets the needs of their unique student populations."
The Shopping Sheet might need to be altered in some circumstances, whether it be something as simple as how to classify the federal TEACH grant, or something much more complicated like how to accurately reflect cost of attendance and net price for part-time students. Financial aid administrators, however, are unlikely to experiment with it and provide invaluable feedback since their own professional organization signals that they shouldn’t. And a system in which every institution creates its own award letter ends up serving no students well.
As an example, here’s a real financial aid award letter, followed by a version of the Shopping Sheet containing the same information. I’ve indicated in red some key differences between the two versions to show how the Shopping Sheet would help students and families make better decisions (click on either image to zoom in):
The first letter combines work-study and loans into the “total award” the student will receive for the academic year, with no reference to the student’s cost of attendance. It goes on to say that “You have been awarded” several federal loans. “Award” is a generous term here since almost the entire cost of attendance will be financed by student loan debt. This amount will only grow larger as interest accrues over time. Even more worrisome, the package includes over $30,000 in a Parent PLUS loan. Of federal loan options, PLUS loans have the highest interest rate, and are not a guarantee — parents have to apply for one.
The Shopping Sheet, by contrast, makes this harsh reality perfectly clear by using the institution’s estimated full cost of attendance and displaying the student’s net price, after accounting for grant and scholarship aid. Federal loans are kept separate from grants and scholarships. Parent PLUS and private loans are only mentioned as a financing option that may be available depending on the student’s situation. The sheet also standardizes common terminology so that loans and grants aren’t cloaked in financial aid jargon — such as labeling a Perkins Loan as “Perkins” or “Perkins L.”
The Shopping Sheet makes this university’s award package look a lot less rosy. And that’s probably one of the main reasons why many institutions and NASFAA are so against it. With skyrocketing costs and persistent state disinvestment, revenue-hungry institutions will try anything to get accepted students in the door. This includes adding more loans to the bottom-line of the aid package, and adding PLUS loans where alternative private loans used to be. Packaging of financial aid is becoming increasingly strategic, and is often done with the institution’s goals, not a student’s need, in mind.
If NASFAA continues to put entrenched institutional interests above students’ financial welfare, it’s unlikely that the Shopping Sheet will be voluntarily adopted at a large scale. The best bet for getting clear, comparable, useful information into students’ hands is federal legislation. Senator Al Franken has introduced a bill with bipartisan support that would require the use of a model aid letter, similar to the Shopping Sheet. “Students today have enough obstacles keeping them from a quality education, deciphering the paperwork shouldn’t be one of them,” remarked Senator Ben Cardin, one of the bill's co-sponsors, “We need to make it easier to understand the options for financial aid and exactly what the full cost will be.”
That’s true, but legislation takes time. Students and their families need help understanding college costs now. If NASFAA is serious about institutional flexibility that actually helps students, then they should encourage institutions to adopt and experiment with the Shopping Sheet now. Otherwise, their flexibility will be legislated away.