Ask Mr. Ethics: Are Institutions Required to Use NASFAA's Terms and Definitions in Aid Offers?

 

The following was reviewed for accuracy and updated on 7/29/2021.

 

Question

Dear Mr. Ethics,

My school is looking to revitalize its aid offers for next year and we would like some clarification on the NASFAA requirements regarding the terms and definitions. While NASFAA has provided a list of universally accepted definitions of language typically contained in aid offers, I’m wondering if we are required to use the terms AND definitions found in the NASFAA Glossary of Terms for Financial Aid Offers? Is there any flexibility and/or institutional discretion in using different terms or different definitions if deemed appropriate?  As an example, NASFAA's glossary recommends using the term "Cost of Attendance," however the definition of Cost of Attendance is the estimated cost of attending this institution. If we preferred using the term "Estimated Cost of Attendance," in lieu of "Cost of Attendance,” would we have stepped outside NASFAA's parameters?  

Sincerely,
In Search of “Award Winning” Definitions

Answer

Dear ISAWD:

NASFAA’s goals in providing aid offer resources include providing greater clarity for students, enabling financial planning, and facilitating comparisons of aid offers. Adherence to the aid offer elements of NASFAA’s Code of Conduct and Statement of Ethical Principles supports an important effort at self-regulation within the financial aid community, to preclude more restrictive federal action. NASFAA’s approach is to provide guidelines and minimum requirements for content, not rigid standardization. This effort, however, relies on consistent use of commonly recognized terminology and definitions, as contained in the glossary.

If a school further expands a definition or qualifies a term to provide greater clarity or more complete information, that is certainly within the intent of aid offer principles. “Cost of attendance” (COA) is by definition an estimate, so calling it that on an award letter is no departure from the idea of standardized terminology. But redefining cost of attendance, for example to exclude certain components enumerated in the glossary, would be a clear violation of the intended purpose.

Likewise, substituting some other term for one in the glossary, and using a different definition, would defeat the purpose of a standardized glossary, and potentially confuse or mislead the student. For example, the glossary defines “net price” as the amount of direct and indirect costs remaining after subtracting all gift aid. Using instead something like “net outlay,” and defining it as the amount of direct and indirect costs remaining after subtracting all aid including loans, would mislead a student about the actual amount the student would ultimately pay.

Bear in mind that statutory provisions underlie some definitions. If you believe you should modify anything, be sure that you remain in compliance with legal requirements as well as in line with the intent of the Code of Conduct and Ethical Principles.

NASFAA’s aid offer principles were formulated by members, based on consumer testing and institutional experience. As far as possible, any modifications should be supported by consumer testing. If you have found improvements to clarity and consumer understanding, please share them with us so we can in turn improve NASFAA’s efforts and materials.

As a reminder, NASFAA has identified four elements that belong in an aid offer because they foster informed decisions about accepting aid, assist families in financial planning, and facilitate apples-to-apples comparisons between schools:

  • Breakdown of estimated individual COA components, including which are direct (billed) costs vs. indirect (non-billed) costs;

  • Clear identification and proper grouping of each type of award, indicating whether the aid is a grant/scholarship, loan, or work program;

  • Estimated net price; and

  • Standard terminology, including for example, common definitions for net price.

Are you working through a common ethical question and want some help? Email Mr. Ethics at [email protected] with your inquiry and check out prior Mr. Ethics columns for answers to other tricky questions.

 

Publication Date: 10/30/2018


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