Sen. Franken Introduces Bill to Standardize Award Letters

Sen. Al Franken (D-MN) introduced the "Understanding the True Cost of College Act" to mandate higher education institutions use a standardized award letter, uniform financial aid terms, and provide information about student loan repayment and a host of other student aid-related disclosures. The bill directs the Secretary of Education to consult with relevant Federal agencies to develop the format and content of the form, with input from students, families, institutions of higher education, secondary and postsecondary counselors and nonprofit consumer groups.

“The amount of debt students in Minnesota graduate with has skyrocketed, and part of the problem is that students often don’t have a clear picture of how much their education is going to actually cost them,” said Franken. “My legislation will require schools to use a universal financial aid letter so students and their families will know exactly how much college will cost, and will help them compare apples to apples when deciding what school a student will attend.”

“We appreciate Sen. Franken’s willingness to reach out to the financial aid community while constructing this bill,” said NASFAA President Justin Draeger. “NASFAA supports standardizing certain elements and terms on award letters and we agree with portions of Mr. Franken’s bill. However, financial aid administrators require some flexibility to customize some of the content and delivery of award letters to meet the unique needs of the diverse student populations they serve. We  embrace our role and responsibility to ensure students receive clear and accurate information. A task force of NASFAA members recently published a report that recommends elements that should be included in award letters, a glossary of standardized award letter terms, and additional student-specific loan information that should be compiled by the U.S. Department of Education and provided to every borrower.”

“We look forward to working with Congress to ensure that clear and simple disclosure information can be provided to students and parents in way that is not overly-prescriptive and does not hinder an institution’s ability to meet the specific needs of its student body or restrict innovative methods of delivery,” Draeger added. 

Required Content

Specifically, Franken’s proposal would require schools to include the following information and disclosures in a “consumer-friendly” manner that is “simple and understandable” on the first page of the award letter (whether in printed or electronic format):

  • Student’s Cost of Attendance (as defined under Title IV of the HEA). Including the most current costs for tuition and fees; room and board; books and supplies; transportation; and miscellaneous personal expenses.
  • Amount of Aid Student Does Not Have to Repay. Including scholarships; Title IV grant aid; institutional, state or private scholarships. Must also include a disclosure stating that this aid does not have to be repaid and noting whether the student can expect these funds for future academic periods.
  • Net Amount Student Will Have to Pay. Defined as the cost of attendance minus aid the student does not have to repay.
  • Work Study Assistance. Including a disclosure that this aid must be earned and the assistance is subject to the availability of jobs.
  • Recommended Direct and Perkins Loans. Including disclosures that loans have to be repaid; students can borrow a less than the school recommends; interest rates and fees; expected monthly repayment based on standard 10-year repayment; and expected total repayment over the life of the loan.
  • Where the Student Can Find Additional Information About Offered Aid. Including contact information for the student aid office on campus and the U.S. Department of Education.
  • Benefits of Federal v. Private Loans. Must include a disclosure indicating that Federal loans are generally more favorable than private loans and that students should examine all Federal loan options before considering private loans.  This section would also include a note from the Secretary of Education describing benefits unique to Federal loans, including repayment plans, deferment, loan forgiveness provisions, and the terms to examine carefully if considering a private education loan.
  • Key Deadlines. Deadline for accepting the financial aid offer and a summary of the process for doing so.
  • Covered Academic Period. Must specify the academic period covered by the award letter as well as assumed enrollment status.
  • Cohort Default Rate.  Provide most recent CDR along with a comparison to the national average CDR. (Note that this provision is only applicable to institutions where more than 30 percent of enrolled students borrow.)
  • Additional Information. The bill provides the Secretary of Education the authority to include any other relevant information related to student loan borrowing that would help students and families make informed decisions.

Senator Franken’s proposal also prescribes a series of other information to be included in the award letter as designed by the Secretary of Education:

  • A concise summary of terms and conditions related to offered grants, loans and work study, as well as a way to provide supplementary information including longer loan repayment terms (may be achieved through links).
  • Additional suggestions for paying the net price at the discretion of the institution.
  • Private student loan disclosures (if the school recommends private loans), including availability of and student’s potential eligibility for Title IV assistance, the impact of a private loan on eligibility for other assistance, the student’s ability to select a private lender of choice, and the rights to accept or cancel loans.
  • For dependent students, references to private loans must include information about Expected Family Contribution (EFC) and Direct PLUS loans, and additional loan eligibility for students whose parents cannot borrow.

In addition, the bill would mandate that the following additional disclosures appear on the award letter:

  • The financial aid award is only for one academic period and that their package may change in the future.
  • How non-institutional scholarships affect the student’s financial aid package. 
  • A summary of the process for renewing Federal and institutional financial aid and a way to obtain additional information, for example by linking to supplementary information.

The bill also mandates that the award letter must:

  • Include a subtotal for each category of aid offered.
  • Use standard definitions and terms, developed by the Secretary of Education. 
  • If the institution recommends less Federal loan aid than the Federal maximum available to the student additional information on Federal loans must be provided in an attached document or webpage.
  • Use standard formatting and design, as developed by the Secretary of Education, subject to consumer testing. The bill further directs the Secretary regarding fonts, order of information, and consistency between written and electronic formats. 
  • Include an attestation that the student has assessed and read the offer form if provided in electronic format.
  • Include language developed by ED notifying eligible students that they may be eligible for VA education benefits and resources for more information.
  • An institution may offer additional information that supplements the aid offer form but is not located directly on the form. 

Consumer Testing

The bill requires the Secretary of Education to conduct consumer testing. Testing may not take longer than six months and must be used to develop the final financial aid offer form. The final standard financial aid offer form must be submitted to Congress no later than three months after the conclusion of testing. 

Effective Date

Schools would have to begin using the standard financial aid offer form eight months after it is finalized. The standard form would have to be used whether offers are made in printed or electronic format to enrolled students and accepted students.

NASFAA & Other Federal Initiatives to Improve Award Letters

Last fall, NASFAA’s Board of Directors established an Award Notification and Consumer Information Task Force, which included practicing financial aid professionals from every sector, to examine best practices and develop the recommendations.

Earlier this week, NASFAA released the task force’s list of recommendations to improve clarity and comparability of college costs and awards between schools without a mandated standard format. The task force’s report recommends standardization of certain award letter terminology and elements while maintaining flexibility for colleges and universities to customize notifications to meet the specific needs of their unique student populations. 

In addition to Senator Franken’s proposal, the Consumer Financial Protection Bureau and the Department of Education are currently researching proposals to improve award letters, which could also result in mandated standardization.


Publication Date: 5/25/2012

Vicky B | 7/26/2012 10:11:16 AM

Coming from working at small schools and large univerisities but also being a past student this could be a really good thing because most schools are not preparing young students for what repayment will be like. Too much has went electronic and no students do not read the materials that are given to them. As FA administrators it is our responsiblity to help them understand. The FA office did not help me understand and processed me for max. each year (I received refund checks) and for an 18 year old that was great. Interest should of been paid while in school but was unaware of what this would do to me in the long run. Now leaving college with a loan debt of $37,000, upon graduation it went to over $70,000 now do to some years of low pay my debt is now $180,000. Being in FA I make sure students understand what can happen because this should never happen to anyone. I understand I should of read things and ask questions, but what 18 year old does.

Feudi P | 5/30/2012 8:38:15 AM

Yet another unneeded and unecessary intrusion of the federal government where it has no business whatsoever. Franken's proposed Award Letter Law, like Gainful Employment, and the takeover of students loans, is a bad, BAD move leading to nothing but more micromanagement of society by the federal government. Kill this thing before it multiplies.

John C | 5/25/2012 2:14:54 PM

I wonder if we will ever reach the elusive point where there is enough government regulation. This is simply another well-intended bad idea created by folks who do not understand how things work. Good grief.

Wendy O | 5/25/2012 12:3:23 PM

Students will not read a 4-page paper letter. The volume of information being provided will overwhelm them and it not exactly accurate :see Net Amount the Student will have to Pay in the article. What we need to do is provide better education about this terminology while the students are in high school, so that nothing is new when it comes to the point of actually understanding their awards.

Nedi G | 5/25/2012 10:39:45 AM

This is where is whole award letter debate/process seems to be going.
After class B and C private universities have to spell out their cost this way, it would be a tougher sell to a middle income family which may slow the rate of tuition increases, however, unintended consequence could be that as a nation we have a lower aggregate graduation rate. We all know that navigating through a pro-retention culture of private university, its better funded student services, “questionable” grade inflation as well as stronger peer support is a lot easier than that of a large, 30,000 student state school or overcrowded and underfunded community college. Not sure that this is the best possible way to manage our perceived student loan problem.

Theodore M | 5/25/2012 9:27:41 AM

Boy will lots of trees die to meet these requirments. While well intentioned this is an example of the enormous overkill that happens when we start to mandate things. This bill is not good enough, smart enough and dog gone it I don't like it.

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