By Douglas A. Levy
Financial aid and higher education administrators understand that accurately estimating and effectively communicating the cost of college and financial aid packages can be a real challenge. When students and parents ask what college will cost or how much financial aid they will get, the answer is inevitably, “it depends.” While students, parents and now lawmakers may find this answer less than satisfying, it is often the only way to avoid providing inaccurate or misleading information.
The primary reason for the common “it depends” answer is the fact that so many variables impact what goes into a financial aid package. In addition to student variables like financial resources, dependency status, enrollment status and housing need/preference, the cost of college is impacted by many other variables like state higher education funding and changes to the federal student aid programs. As a result, student aid packages and the net-price of college are highly individualized and constantly in flux.
Despite the challenge, higher education institutions embrace their responsibility to deliver accurate information. I witnessed this as chair of NASFAA’s Award Notification and Consumer Information Task Force. To develop recommendations, the task force reviewed sample award letters from various institution types, surveyed financial aid offices and consulted with consumer groups, other higher education associations and student aid experts. Through this process, I have seen the difficult decisions institutions grapple with to ensure their award letters are succinct and easy-to-understand, but also comprehensive and accurate.
The complex interplay of volatile factors that impacts the net-cost of college makes it unreasonable to expect a one-page award letter to convey all relevant information or for colleges to tackle this vital challenge alone. That’s why I applaud the Obama administration and Congress for working to address this important issue. However, these efforts must proceed with caution to avoid potential negative unintended consequences. Here are three things we should watch carefully.
First, the process to make consumer information and financial aid award letters simple and transparent has become incredibly complex and opaque.
It began with a mandate by Congress for the U.S. Department of Education to research financial aid letters and recommend ways to strengthen them. Then the Obama administration created the Consumer Financial Protection Bureau (CFPB) which was charged with creating a college cost shopping sheet and improving financial aid award letters. While these two efforts seem to be collaborative, it is unclear at what level of collaboration exists and it raises concerns that final recommendations could overlap. Although the Education Department hasn’t finalized its report to Congress, some lawmakers have already introduced legislation to improve financial aid award letters and higher education consumer information. If Congress acts, it could preempt any recommendations from the Obama administration through the CFPB and Education Department.
Second, some lawmakers and student aid policy experts have been pushing for a standardized student aid award letter that would eliminate any flexibility for institutions to customize the information to meet the unique needs of their student populations. While I recognize the need to standardize terms and certain content and elements of the award letter, institutions also need some flexibility to customize the format and presentation method (e.g., paper, web self-service, mobile app) to the unique needs of their student populations and communication standards already in place at the institution. These are the reasons why NASFAA’s recommendations seek to strike a balance by standardizing award letter terminology, content and elements while maintaining flexibility for colleges and universities to customize award letter presentation.
Third, there has been much rhetoric about finding a way to make the purchase of higher education similar to buying a house or car. While this makes a good talking point, it is unrealistic comparison.
“The decision about a liberal-arts college versus a large university with a strong communications program, a community college that will prepare you for transfer to a bachelor’s nursing program, or a technical college to learn welding is not quite like three bedrooms or four,” according to a recent Chronicle of Higher Education article by independent higher education policy analyst and consultant Sandy Baum and Spencer Foundation President Michael McPherson. “No rating system can measure the compatibility of one’s interests, skills, and personality with specific schools.”
Baum and McPherson note that, while it may be difficult to develop the perfect set of metrics, we shouldn’t let perfection be the enemy of the good. I fully agree with this sentiment and it is one reason I volunteered to chair the Award Notification Task Force.
It should be said, however, that while adopting NASFAA’s award letter recommendations will strengthen this critical tool and help students and parents make more informed decisions about higher education, it is not a silver-bullet solution. Award letters and higher education institutions can’t solve this problem on their own. They need help. This includes (but is not limited to) increasing financial literacy for students at a younger age to ensure students and parents have a basic understanding of financing their higher education and how that equates to a comprehension of the elements on an award letter.
Institutions also need states and the federal government to provide more stability and predictability. Recent reductions in state funding have forced many colleges to increase tuition and fees to compensate. Predicting what college will cost is increasingly difficult when one revenue stream is constantly changing.
In addition, the U.S. Congress has enacted many changes that have eliminated or reduced student aid eligibility for many students. These changes have been the result of backroom budget negotiations and included in last-minute budget bills, giving students and families little time to understand or plan for these updates. For example, students planning to borrow subsidized Stafford Loans this fall are not sure if their interest rate will be 3.4 percent or 6.8 percent. Enacting student aid policy through this process—instead of through the more deliberative reauthorization process utilized in updating the Higher Education Act—eliminates robust debate about what is best for parents and students and makes it exponentially harder for institutions to communicate accurate financial aid information to students and parents.
Estimating and communicating college cost information would be easier if states provide stable funding and Congress sticks to a process that uses reauthorization—not annual budget bills—to set adequate funding levels through the Higher Education Act. This will increase predictability by allowing ample time for implementation, early awareness, and family budgeting.
Colleges are working to do more to help students and families understand, estimate and compare educational costs, and we encourage others to collaborate with us to accomplish this worthy, but challenging goal.
Douglas A. Levy is the Director of Financial Aid for Macomb Community College in Warren, MI, and Chair of NASFAA’s Award Notification & Consumer Information Taskforce.
Publication Date: 6/29/2012