College cost and financial aid are top-of-mind issues for students and their families. Financial aid offer letters are intended to communicate financial aid eligibility to students and families, yet most offer letters are difficult to understand and often missing critical information. Below are four ways to ensure your institution’s financial aid offer letter provides helpful information to students and families as they prepare to make their college decision.
1. Use clear and understandable terminology:
Insider lingo and acronyms found in many financial aid materials are difficult to understand and navigate by students and families. To minimize the confusion, institutions should be mindful to include definitions or instructions when developing materials and language, especially financial aid offer letters. In a 2018 report by New America and uAspire where researchers reviewed hundreds of financial aid letters, 136 different names were found to describe the federal unsubsidized loan, and some didn’t have the word “loan” in the description at all. NASFAA provides a glossary of universally accepted definitions of language that could be adapted by institutions to help students and families understand confusing terms. In an earlier post, we also detailed 10 terms to clarify in financial aid materials and meetings.
2. Describe each aspect of the financial aid award offer:
In 2019, the Department of Education offered nine recommendations to improve the clarity and transparency of financial aid letters. Three of these recommendations incorporate how institutions represent financial aid awards. Institutions should clearly depict each offer by the type of award: grants and scholarships (do not need to be repaid); loans (need to be paid back, with interest); and work-study (must be earned). In the New America and uAspire report, 70 percent of the letters grouped all aid together and did not provide information to help differentiate the awards. Listing these awards separately and providing appropriate definitions, as mentioned above, can provide additional information to students and families who may not understand the differences between each award.
Financial aid award letters should also include additional payment opportunities. In this section, institutions can provide information on outside scholarships as well as additional loans, like private and Parent PLUS loans. Best practice avoids listing the PLUS loan with student loans since this loan requires an additional application and cannot be obtained by the student, the parent must be eligible and willing to take the loan. However, institutions can list this and other opportunities as a potential next step, discussed below.
3. Detail the full cost of attendance, including both direct and indirect costs:
Several of the recommendations from the Department of Education highlight the need to include the full cost of attendance, including both direct and indirect costs. In the report by New America and uAspire, 36% of the 515 award letters left out cost information altogether. Including institutional costs provides context for families to understand their financial contribution. It is important to include all components of the cost of attendance for families to fully understand not only the direct costs billed by the institution, but also the additional, or indirect, costs like books and transportation. Additionally, all costs and awards should be for the same time period, institutions should not mix four year costs with semester or single year costs.
Another cost element to include is the net cost, the difference between the cost of attendance and the financial aid award. Another finding in the New America and uAspire report reflects inconsistent bottom-line calculations. According to the report, only 40 percent of letters calculated the net price, with 23 different ways of calculating the costs across those letters. While the calculation will inevitably be different across institutions, it is important to clearly specify how the net price is calculated, such as which awards are included in the calculation and describing any additional requirements to obtain those awards.
4. Include next steps to assist students and families:
The financial aid process can be challenging for families to fully understand. Including critical next steps, such as how to accept/decline the financial aid offers, important deadlines, and additional payment options, can provide helpful insights for students and families on how to move forward in the process. Additional information can be prepared and available on an institution’s website to provide additional resources that cannot be listed on the financial aid letter.
The financial aid letter can serve as a valuable recruiting tool to emphasize the care and detail students can expect from your institution. However, typical financial aid letters are often crowded and difficult to navigate. While not the top priority, an appealing visual layout can deliver the financial aid information in an easy-to-read format. Financial aid offer letters must be transparent and accessible and should clearly communicate the true cost of the institution and essential next steps.
Sources:
Diverse Issues in Higher Education: Study: College Financial Aid Award Letters Lack Clarity, Transparency
NPR: Confused By Your College Financial Aid Letter? You’re Not Alone
New America and uAspire Report: Decoding the Cost of College
IFAP Announcement: Recommendations: What Postsecondary Institutions Should Work to Avoid When Issuing Financial Aid Offers