Reps. Lori Trahan (D-MA) and Lloyd Smucker (R-PA) on Tuesday introduced the Financial Aid Communication and Transparency Act of 2019 — or FACT Act — a bipartisan bill created to bring some standardization to financial aid offer forms by mandating the use of standard terms and definitions, as well as requiring institutions to include a "quick reference box" allowing students to quickly compare aid offers.
The FACT Act, which is supported by NASFAA, mandates few formatting requirements except for the requirement that any formatting doesn’t present loan options as aid that reduces the amount owed to the institution or the net price. The bill directs the Department of Education (ED) to conduct consumer testing that establishes standardized definitions and groupings of aid type and determines any additional elements that should be included in financial aid offers.
The FACT Act is the second bill introduced this session specifically focused on financial aid offers. Last April, Sen. Chuck Grassley (R-IA) introduced the Understanding the True Cost of College Act, which took a more prescriptive approach to aid offers. The bill would mandate the use of standard language and a standard format, set strict standards for the way financial aid and enrollment information can be displayed on the first page of the aid offer, and include multiple disclosures that must be included when specific aid types are listed. The Grassley bill would also not allow Federal Work-Study (FWS) to be listed with the other financial aid offers. Additionally, the bill would only allow Parent PLUS, Grad PLUS, and private student loans to be included as "additional funding options" on the aid offer, and if the institution chose to include them, it could not include suggested borrowing amounts.
"Financial aid offers play a critical role in helping students and families understand how to pay for college," said NASFAA President Justin Draeger. "It is equally critical that aid offers are transparent and provided in a way that helps students truly understand what they will pay today, and into the future. While NASFAA has required member institutions to meet many of these standards for years, we appreciate the compounding and amplifying positive effect that this bill would have on thousands of schools and millions of students. We applaud Reps. Trahan and Smucker, and urge Congress to take swift action on this bill."
The FACT Act includes required explanatory notes when certain types of aid are offered, including:
For grants and scholarships, a note that these types of aid do not need to be repaid;
For loans, including Parent PLUS, Grad PLUS and/or private loan programs if listed, a note that this type of aid must be repaid with interest; and
For Federal Work-Study, a note that jobs under this program are contingent on students obtaining qualified employment, and that funds are disbursed incrementally.
In addition to the requirements for language associated with aid offered, the FACT Act also mandates a few requirements for cost-related elements that must be included on every aid offer:
An itemized cost of attendance (COA), separated and calculated by direct and anticipated (indirect) costs;
Eligible federal, state and institutional aid with separate subtotals for grants and scholarships, loans (excluding the PLUS programs and private loans), FWS jobs and/or other campus employment;
Other options that may be available to students to cover the COA (including Parent PLUS Loans, tuition payment plans, savings, and earnings from other employment);
Net price, which is determined by the COA less eligible grants and scholarships offered; and
Instructions for next steps which must include how to accept or decline aid, any applicable deadlines to receive the aid offered, as well as where to find additional information about the financial aid offered.
The FACT Act also includes the addition of a mandatory "quick reference box" that must be included on the first page of financial aid offers, and would be developed through consumer testing by the ED. The box would feature three data elements that would allow students to quickly compare aid offers, including cost of attendance, total grants and scholarships offered, and net price.
The bill would allow institutions to add supplemental information in addition to the required information on their financial aid offers.
Publication Date: 9/18/2019