What Would You Do? Exploring Ethics In Award Letters


This new series, Exploring Ethics, aims to open discussion between NASFAA members about how to apply the association's Ethical Principles and Code of Conduct through case studies. 

If you have an ethical situation you'd like us to explore, please email your question to [email protected]. The information you send will be used solely for the purposes of an anonymous case study. If you would like to provide a written reaction to a future case study, please email [email protected] to volunteer. 

In the series debut, we take a look at what a sample financial aid offer may be missing – and why that would not comply with NASFAA's Code of Conduct. 

The Ethical Dilemma: Transparency

In conversations with students and parents, financial aid administrator John tries to be as transparent as possible about how much college will truly cost, and what aid they can use to help. He is adept at delineating the differences between self-help and gift aid, and is confident that prospective students leave his office with a greater understanding of financial aid.

The college's financial aid offer is not quite as clear, however. The terms make sense to practiced aid professionals, but some less-informed recipients aren't able to differentiate between grants and loans. Recipients may be confused by some terminology, such as direct and indirect costs and, as a result, may not realize that they will not be billed for indirect costs. They could possibly avoid a suggested loan by reducing indirect costs over which they have some control.

John wants to revise the school's aid offer by grouping offered aid under clear headings for "Grants you do not have to repay" and "Loans you must repay after you leave school." The institution's administration doesn't mind emphasizing gift aid, but fears that emphasizing the repayment aspect of loans will scare prospective students away. They also don't understand John's assertion that "direct" and "indirect" costs are confusing.

Reactions from the Aid Office

We asked three NASFAA members to weigh in on why this ethical issue is important to address, and how they would handle it in their offices.

Lisa Hopper, director of financial aid, National Park Community College: "The college's aid offer does not clearly delineate the different types of aid and explain what the terms used in the aid offer mean in a standardized way.  Our office would (and has in recent years) modify our aid offer to use the standard terminology and definitions using NASFAA's glossary of aid offer terms. We would modify the aid offer to use the terms gift aid, self-help and loans in separate sections of the offer.

The terminology surrounding direct and indirect costs is slightly more nebulous but, with the use of these standard terms, links can be provided within the aid offer that further describe the precise costs that would be considered direct and indirect at each institution. This would allow the students to have further explanation about what is directly billed to the student by the institution and those that might be a choice by the student. Links could also be provided within the aid offer in the area of loans to direct the student to the studentaid.gov website or wherever the institution chooses to further explain that loans must be repaid after the student graduates from the institution. Institutions must be forthcoming and transparent about the responsibilities that come with student loans. Students should have full knowledge, even if this invokes a healthy 'fear' about taking on too much loan debt, prior to signing any loan documents."

Mary Sommers, director of financial aid, University of Nebraska – Kearney: "The ability for our students to be able to understand financial aid offers is absolutely essential. Despite limitations built into our student information systems and shortages in programming resources, clarity and transparency are vital to our institution's success.

If I were in the position of the aid director in the case study, the first thing I would do is use NASFAA's Statement of Ethical Principles as ‘cover.' I would explain that as a NASFAA member institution we are expected to ‘strive for transparency and clarity.' This includes our stated principle of ‘educating students and families through quality information that is consumer-tested when possible,' which includes transparency and full disclosure on aid notices.

I would propose bringing in a group of current students and asking them to navigate our current aid notice and to ask them what they understand and what they find confusing. I would use the survey tool found in the appendix of NASFAA's aid offer test report as a good template to get student feedback. I would include other university administrators who have concerns about my plans to revise the aid offer in the observation of the focus group. My hope would be that feedback directly from students would reinforce my position. Including those colleagues who have expressed concern is a way to build understanding and hopefully consensus."

Ron Day, director of financial aid, Kennesaw State University: "Often financial aid offers are created as seen through the eyes of experienced aid administrators. The routine and familiar ‘language' and financial aid vernacular is utilized by professional aid staff members. While the use of acronyms, complex phrasing, and words that carry multiple meanings seems to be clearly and adequately stated, it may in actuality be seen as ‘Greek' to those outside the financial aid profession.

It is important to provide information in a clear and succinct fashion. John should allow students to review the offer prior to distribution and provide feedback regarding clarity and suggestions. This will provide an opportunity for the customer to ask specific questions that can be addressed in a more effective and concise offer. Direct and indirect cost elements, although a more realistic picture of a potential budget, are confusing when simply listed as part of the standard Cost of Attendance (COA). John should seek to provide a very detailed description of actual institutional expenses and those cost elements that students will incur outside of the standard official charges.

If the administration of the school pushes back on providing very detailed and succinct information to students regarding actual and potential charges, it is important that John explain the importance of being transparent and forthcoming and utilize NASFAA's published code of conduct as backup. Parents and students should know actual and potential expenses. This will enable them to adequately select the correct aid package and the correct institution. Providing this information will assist in a more well-versed and knowledgeable student." 


To "Strive for transparency and clarity" is a key tenet in NASFAA's Statement of Ethical Principles. Aspirational goals include to: 

  • "Provide our students and parents with the information they need to make good decisions about attending and paying for college.
  • Educate students and families through quality information that is consumer-tested when possible. This includes (but is not limited to) transparency and full disclosure on aid offers."

It's clear that financial aid administrators' ethical principles aim to inform prospective students first - rather than surprise enrolled (and possibly indebted) students later. 

The Code

NASFAA's Code of Conduct is even clearer on transparency standards.

 "Institutional aid offers and/or other institutionally provided materials shall include the following:

  1. A breakdown of individual components of the institution's Cost of Attendance, designating all potential billable charges.
  2. Clear identification of each aid, indicating type of aid, i.e. gift aid (grant, scholarship), work, or loan.
  3. Standard terminology and definitions, using NASFAA's glossary of aid offer terms.
  4. Renewal requirements for each aid."

Put simply, institutions that send aid offers without the above components either directly on the notification or in accompanying materials are not compliant with NASFAA's Code of Conduct. 

How NASFAA Can Help

The organization has published numerous resources to help financial aid administrators stay in compliance with transparent financial aid materials. The Glossary of Terms for Aid Offers contains common-sense terminology that should be included in each aid offer. The AskRegs Knowledgebase has ready answers to many questions about financial aid offers, and NASFAA's training experts continually accept new queries. What's more, Today's News articles can help to illuminate the knowledge gap between aid administrators and the students and parents they serve.

Under NASFAA's new Code of Conduct Enforcement Procedures, anyone can also inquire about their compliance, without penalty. An ethics-related inquiry is a means for determining whether a policy, program, activity, behavior, or conduct contravenes the Code, for requesting guidance regarding a proposed endeavor, or for requesting assistance from the NASFAA Ethics Commission, without resorting to enforcement proceedings.

The Upshot

So, what happened at John's institution? Emboldened by the NASFAA Code of Conduct, John convinces his boss to conduct a short survey testing students' understanding of "direct" and "indirect" costs and the fact that indirect costs can, to some extent, be controlled by the student and his or her family. The results clearly show that more explanation of these terms and their implications is necessary. John also convinces the school's administration that providing debt management strategies and information about loan forgiveness upfront is preferable to resentment students may feel later on about being mislead. 

John follows up with a sample of students after making these changes and survey results indicate that the aid offer is demonstrably improved with students feeling more informed about their financial aid options. 


Publication Date: 10/29/2014

David H | 11/6/2014 4:23:04 PM

In response to Marvin, I like the terms "Net Direct Costs" and "Total Net Costs." I think it's confusing the way the feds have tried to call Total Net Costs, the "Net Price" because I think family's associate the term "Net Price" with the total bill they will pay to the school.

Marvin S | 11/6/2014 9:24:35 AM

According to NASFAA glossary..."Net Cost"=Amount of direct and indirect costs remaining after all gift aid (scholarship and grant) is subtracted. "Out-of-pocket Cost"=Difference between the cost of attendance and all gift aid.Out-of-pocket cost can be covered through a variety of sources, including: savings, income and educational loans. So it appears that Net Cost=Out-of-pocket Cost. And we probably should say that Net Cost = "Net Price" by the federal definitions. I'm fine with all that. But what is the term we should use for the difference between Direct Costs and gift aid? I would like to see NASFAA come up with standard terminology for this missing piece of the puzzle. I'm convinced families search for this and only get the "mysterious" number when they get the bill.

Joseph S | 10/31/2014 1:21:31 PM

The various letters that students receive have always differed and for some they have been confusing. What we must all do is pledge to make them understandable and then abide by the founding principles of NASFAA, which has consistently reminded us all of the need for clarity. Over the many years, we have all heard of the stories as to why it is all not clearer to the average person, and that is OUR goal.

Theodore M | 10/30/2014 9:41:22 AM

I am a bit confused because we are supposed, by the code of conduct, use terms from the glossary on our aid letters. The terms Direct Costs and Indirect Costs are part of that glossary, yet this case study seems to indicate they are bad. My institution could be kicked out of NASFAA for not using them, but you seem to be advising against it.

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