Think Tank Calls to Revamp Financial Award Letters

By Joelle Fredman, NASFAA Staff Reporter

In an effort to help students better understand financial aid award letters, non-partisan think tank New America offered several policy recommendations for Congress, states, and institutions to adopt when drafting their offers in a report released Tuesday.

The report, “Decoding the Cost of College: The Case for Transparent Financial Aid Award Letters,” written in conjunction with nonprofit group uAspire, analyzed more than 500 award letters and found that many included confusing jargon, omitted the Cost of Attendance (COA), and did not differentiate between different types of aid, among other issues. Many of the recommendations in the report closely align with the work that NASFAA has done to ensure that award letters are clear and consistent, with a few exceptions.   

New America teased the prospect of a full report on award letters back in January in blog post, which was published the day that uAspire Chief Policy Director Laura Keane testified before Congress about the lack of transparency in award letters.

Kim Cook, the executive director of the National College Access Network (NCAN), said in a panel discussion Tuesday to promote the report’s release that these issues with aid award letters are fueled by larger problems within the higher education system surrounding affordability and completion.  

“Research like this gives a real window into the challenges students face when they tackle the larger affordability issue we have in this country,” she said. “... How is it we lose 50 percent of our first-time, full-time students? Because they take a chance and say, 'I'm going to be the 10 percent, 20 percent and succeed' and don't understand the financial aid [and] loan-taking, which fuels the completion issue we have."

Cook said during the event that higher education stakeholders should begin by applauding institutions that provide students with clear and effective award letters, but that “there aren't enough of them."

While the report includes suggestions for institutions to improve their award letters, New America wrote that ideally Congress should create a uniform letter over the next three years for each institutional sector, that would be developed “in concert with students, families, industry experts, and institutional stakeholders from every sector (public, private, and for-profit),” and undergo consumer testing.

While NASFAA has been supportive of consumer testing for award letters, it has voiced concern about a standardized form that would effectively work for all schools across all programs.

“We are doubtful that a federally mandated form will fit the needs of the many different schools throughout the country, offering different types of aid,” NASFAA President Justin Draeger said. “But we agree that standardized terminology and minimal requirements about what should be included in award notifications should absolutely be on the table. In fact, NASFAA members have taken the lead in this effort by committing to self-adhere to those standards in our code of conduct. ”

New America, in the report, explained that “NASFAA members must adhere to a code of conduct that stipulates all aid notifications must meet basic guidelines (e.g., standard terms, breakdown of cost of attendance, clear identification of each type of aid—loan, grant, work),” but said its analysis showed “a majority of institutions are not following these guidelines.”

While NASFAA expects that its members will adhere to the association’s Code of Conduct, it relies upon complainants to notify the organization if and when they become aware of institutions that are not in compliance with the code. When schools are not in compliance, “it's often not due to an unwillingness on schools' part to provide students with clear information, but rather a lack of awareness, time, or resources,” Draeger said. “In our experience, every time we've had a school not in compliance, they have promptly taken steps to bring themselves into compliance after we have notified them.”  

The report also cited a 2013 NASFAA study, which involved showing focus groups three different award letters to determine best practices for award letters, including the Department of Education’s (ED) own suggested “Financial Aid Shopping Sheet.” While the New America report wrote that the study was “inconclusive,” focus group participants identified aspects of each award letter that were useful, further supporting NASFAA’s assertion that until consumers are directly involved in the development and testing of new consumer information products, it is impossible to accurately gauge what they want or need.

One major issue the report found within award letters was that institutions used a variety of different terms, including abbreviations, to refer to the same type of aid, which confused students who did not understand the financial jargon and made it difficult for students to compare award offers across institutions. For example, the report wrote that 455 colleges that referenced unsubsidized student loans in their award letters used 136 different terms for it, from “Fed Dir Unsub Loan” to “Uns Stafford Loan.” Financial aid administrators have pointed out that often these types of issues are directly attributed to the system limitations of their financial aid management software.

The report recommended that Congress and/or state governments require that a standard list of terms and titles be used across all financial aid award letters, and that “in the interim period, institutions should adopt this same terminology to ensure their offices are clear,” a measure that NASFAA itself supports. As a term of its Code of Conduct, NASFAA provides its members with a glossary of award letter terms to ensure that students can compare aid across the board.

The report also suggested that award letters include a calculation of an institution’s COA, with a breakdown of both direct and indirect expenses. The groups wrote that of the award letters they analyzed, 36 percent did not mention cost at all, which inhibits a student from “contextualizing their awards,” and others failed to mention an institution's indirect costs. Tom Biedscheid, the director of financial aid at Colorado State University (CSU), said during Tuesday’s discussion that inhibiting students from getting a full picture of the costs of attending an institution will hurt schools in the long run because their students will not be able to afford to continue their education. 

“If you’re not given the truth upfront, chances are you’re going to stop out,” he said.

NASFAA recommended in its report following the 2013 study that award letters include an institution’s COA with a breakdown of direct and indirect expenses, gift aid, net costs after gift aid, and self-help options, such as loans and Federal Work-Study (FWS), among other information.

The New America report also suggested that institutions list a student’s gift aid and loans separately and identify “critical next steps” that students should take following the letter, both of which NASFAA has supported.

The report recommended that institutions not include FWS and Parent PLUS Loans as line items under gift aid and loans in their award letters because they are “not definitive dollars,” nor include them in their calculations of total aid. Instead, the report wrote that institutions should list them as “additional options to cover costs along with tuition payment plans, savings, etc.” Draeger, however, said that the institution is in the best position to determine what is offered in a financial aid award, as long as the financial aid is correctly identified and grouped.

NASFAA will be hosting the authors of this report at its annual conference later this month. During the panel, presenters will discuss the findings and lead a discussion on how to ensure students and families successfully understand their college costs.

“NASFAA has a vested interest in making sure award letters are clear and we appreciate efforts aimed at improving disclosures for students,” Draeger said. “Our own code of conduct provides a template for lawmakers to consider when thinking about how to make award notifications clear to students. We look forward to working with all stakeholders to ensure students can make informed decisions about their postsecondary experience.”


Publication Date: 6/5/2018

David S | 6/6/2018 10:24:11 AM

Please read this report, folks. The quality of award letters has a long way to go; remember that students, parents, and essentially, 99.9999% of the human race is not fluent in financialaidspeak. Remember that showing a credit based loan that hasn't been approved or even applied for yet is going to mislead some people. If you don't like the way your system makes your award letters look, talk to your system vendor, because they should be providing us with a product that serves students instead of saying "here's your Fed Unsub Ln #1."

The alternative to us improving our own letters will be for Congress to do it for us and give us no choice. We probably won't like that (and there's a good chance students and parents won't either...remember, the federal government also gave us the FAFSA, and no one holds that up as a pinnacle of clarity).

George J | 6/6/2018 10:14:50 AM

Schools that are reticent to disclose the COA for fear of sticker shock should consider that a full explanation of indirect and direct costs can show applicants where they have the opportunity to help make their postsecondary experience as affordable as possible.

James C | 6/6/2018 8:49:30 AM

I agree with the recommendations of a standard award letter across sectors and not including FWS and PLUS in the calculation of total aid. The only true way for families to compare awards is for all the schools to use the same template. Also COA is useless if it doesn't have a breakdown of direct and indirect costs so I am happy to see that recommendation.

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