Congress Should Fix Financial Aid Offers

A group of higher education associations announced the formation of a task force late last month on transparency in student financial aid offers, called the “Paying for College Transparency Initiative,” with a stated aim of “improving the clarity, accuracy, and consistency of student financial aid offers by producing a set of guiding principles and minimal standards to be used when developing aid offers.” Improving transparency is a noble and important effort, no doubt, but the announcement should raise several questions about why now, whom the task force serves and how it will help. And we should call into question a task force that has been announced the week before a Government Accountability Office report called on Congress to act on this issue.

Unclear and misleading financial aid offers are a well-documented problem. Students, college access counselors, journalists and policy analysts have said for years that financial aid offers—sometimes called “awards” or “letters”—presented by colleges and universities are often confusing and even misleading, making it difficult for students to discern between the grants, scholarships and loans offered to them, or even their full cost to attend.

A decade ago, the Obama administration even tried to model what financial aid offers should look like, noting that their “obscurities make the task of comparison-shopping for the most affordable and appropriate college even more difficult.” But with pickup of the Obama administration’s model financial aid award letter being purely voluntary in nature, the higher education team at New America decided to find out if the problem of misleading financial aid offers was real—and, if it was, just how big of a problem it was.

Partnering with college access professionals in 2018, New America examined more than 11,000 financial aid offers that students received. Across approximately 500 different colleges and universities, the results were astounding and mirrored the stories of impossible-to-decipher offers. Colleges used more than 130 different ways to describe the exact same federal loan; two dozen didn’t even call it a loan. More than a third didn’t include the price to attend. Some also used loans that parents must apply for (Parent PLUS loans) in order to make the financial aid offer look much more generous than it is or even reduce a student’s “unmet need” to zero, making it seem like the student received a full ride. And those are just some of the findings.

Higher education has known for at least a decade that this was an issue, and the GAO report makes it abundantly clear that the problem hasn’t gotten any better, finding that “most colleges are not following best practices for providing clear and standard information in their financial aid offers.” This despite the fact that the National Association of Student Financial Aid Administrators has issued an updated code of conduct in an attempt to address the issue. Even the U.S. Department of Education issuing guidance outlining best practices for financial aid offers didn’t work. In fact, the GAO report showed that just 15 percent of institutions made significant changes to how they presented their financial aid offers after that guidance was released in 2019.

If a code of conduct and federal guidance doesn’t change institutional behavior, how will nonbinding “guiding principles” created by a new multiassociation task force do the job? Clearly, something more enforceable must be done, which is why GAO recommends congressional action, a bold suggestion from a government watchdog typically reticent to do so. The bipartisan Understanding the True Cost of College Act would require standardized terminology in financial aid communications. Colleges and universities would also have to provide a uniform aid disclosure, while still being permitted to provide supplemental information. This uniform aid disclosure would be designed with students, financial aid professionals, institutional representatives, high school counselors and others at the table and would use robust consumer testing to ensure that students and families can make apples-to-apples comparisons.

Even if the new task force could spark change, it’s difficult to imagine its guiding principles will serve students given the composition of the task force. While it’s notable that the presidents of major associations are involved, every single member of the task force heads an association representing higher education. Six of the 10 members represent colleges and universities themselves, two represent state higher education executives and systems, one is an association for college admissions counselors, and the last one is NASFAA.

Who didn’t get a seat at the table? The students and families who actually pay for college. This raises a crucial question: How can a group of institutions fix a problem—one of their own creation and one where essentially no progress has been made for decades—without the voices of those who are affected by the problem? Why would they leave them out?

The answer is simple: institutions want the ability to look more affordable than they are and to make students think aid goes farther than it does. Colleges want the freedom to do what they want so that they can use their offers to drive enrollment.

With declining enrollments and a possible demographic cliff, it’s understandable that colleges are facing increased competition. But students and families deserve to be able to make informed choices, and institutions should make the case using the aid offered and education provided, without using confusing and misleading offers.

The bottom line is that the task force isn’t needed. We know the problem and we know what needs to be done. What’s needed is congressional action. If the higher education community wants to actually solve the problem, its members need to support legislation to standardize financial aid offers so that students and families can make informed financial decisions. The time is now for policy makers to solve this no-brainer problem and pass the Understanding the True Cost of College Act, and an end-of-the-year spending package is a perfect opportunity to move legislation.