Providing more consumer information about college costs and financial aid will not be enough if the resources are not better targeted to the needs of students and families, according to a recent literature review from Young Invincibles (YI).
While there is an ever-growing amount of information about financial aid, previous YI research showed that “more than two-thirds of student loan borrowers misunderstood or were surprised by some aspect of their student loans.” Other YI research showed that nearly half of all recipients of federal financial aid were given inaccurate information about their aid or did not recall receiving any information.
In an effort to better understand what information students needs, YI conducted a review of literature on finance, marketing, and consumer research, focusing on how consumers search for and process information on comparable financial decisions, such as mortgages. These decisions are similar to higher education in that they are “infrequent, expensive, and impact the consumer’s long-term financial well-being,” the review notes.
“Overall, our review demonstrates that students and families have different information search processing skills,” YI wrote in the review. “Providing clear, simple, and specifically-tailored information will equip students and families with information to make better choices, but various other efforts must be made to ensure equity in access to higher education.”
The literature review looked at three areas:
According to YI, the literature review showed that consumers are not likely to conduct extensive information searches for major financial decisions, despite the likelihood that such research would benefit them. Rather, “they use mental heuristics and biases in an effort to make higher education decisions,” which can lead to mistakes.
To address this, YI recommends first that researchers look more closely into the motivations of students and their families in researching how to pay for higher education, as well as what factors discourage them from doing so. Second, YI suggests four measures information providers can take to better convey information to consumers, including:
Regarding how to better help consumers process financial information, the review showed that more consideration should be given in how to frame the information so it is accessible and useful. YI recommends providing "unambiguous and complete” information and not overloading consumers with large amounts of, or redundant, information about financial aid. The group also suggests things like presenting the information in both dollar and percentage terms and getting feedback from relevant consumer groups on how the quality of information can be improved.
And finally, the review found that “individuals with lower educational attainment, financial literacy, and/or income levels are at a disadvantage with regard to their information search and processing capacity.”
“These findings are disconcerting,” YI wrote in the review, “ because differing levels of capability with regard to information search and processing are directly related to college access and equality.”
The group offered several recommendations to better provide information to these populations, including:
Publication Date: 6/11/2015