Financial aid award letters can be pretty confusing for the average family. Most financial aid administrators tend to be risk-averse so that the net price can get lost among the fine print. I was reading an article today, and a group called New America, and uAspire conducted a quantitative study of 11,000 different award letters. The study found not only that financial aid is insufficient to cover the cost of attendance for the majority of students, but also that award letters lack consistency and transparency.
As a practicing financial aid administrator, I am not surprised with the findings of this survey. Even though we have the Net Price Calculator and the Federal Shopping Sheet to help break down the cost of higher education for families, there are still many marketing tactics that organizational leaders use to help entice students to deposit. Higher education is a very competitive market, and sometimes only the tiniest of details separates different institutions. Although hiding the true cost of attendance to the family should be highly discouraged. If the cost is too prohibitive, enrollment managers should bring these concerns to the executive leadership teams to find some different ways of curbing the cost to families.
The researchers reviewed a subset of 515 award letters from unique institutions and found seven key findings. The findings from the study can be seen below.
- Confusing Jargon and Terminology: Of the 455 colleges that offered an unsubsidized student loan, we found 136 unique terms for that loan, including 24 that did not include the word “loan.”
- Omission of the Complete Cost: Of our 515 letters, more than one-third did not include any cost information with which to contextualize the financial aid offered.
- Failure to Differentiate Types of Aid: Seventy percent of letters grouped all aid together and provided no definitions to indicate to students how grants and scholarships, loans, and work-study all differ.
- Misleading Packaging of Parent PLUS Loans: Nearly 15 percent of letters included a PLUS loan as an “award,” making the financial aid package appear far more generous than it really was.
- Vague Definitions and Poor Placement of Work-Study: Of institutions that offered work-study, 70 percent provided no explanation of work-study and how it differs from other types of aid.
- Inconsistent Bottom Line Calculations: In our sample, only 40 percent calculated what students would need to pay, and those 194 institutions had 23 different ways of calculating remaining costs.
- No Clear Next Steps: Only about half of letters provided information about what to do to accept or decline awards, and those that did had inconsistent policies.
Financial aid administrators looking for ways to be more transparent without losing an edge to a competitor should consider a redesign of their award letter. NASFAA highly recommends found key components that should be included in every award letter. The data points are
- The cost of attendance,
- Estimated costs that remain after gift aid is subtracted,
- The self‐help aid offered and/or recommended by the school and the amount of estimated costs remaining for the student and family to fund, and finally,
- The cost of borrowing.
Ultimately, families are counting on us to help them make college affordable. In an ideal world, an estimated four-year award letter would help families plan more accurately, but this is a concept that is still far off from reality. Until then, the more transparent and consistent the award letters are between organizations, the more successful the next generation of leaders will be.
References
[1] NASFAA (2011) The Award Letter Concept: A Model Concept.