Financial Aid Offers: There Are Disparities in Who Is Confused and About What

By Joelle Fredman, NASFAA Staff Reporter

Policymakers have recently been taking aim at improving institutions’ financial aid offers and increasing transparency in higher education —  such as House Democrats who included regulations to mandate the use of standardized terms in aid offers in their bill to reauthorize the Higher Education Act (HEA). At the same time, a new report by CampusLogic highlighted the need for institutions to be afforded the flexibility to tailor their aid offers to their unique student populations, an issue NASFAA has long advocated for

The report found that students and parents of different ages, races, and income levels are confused by different sections of the Department of Education’s (ED) sample aid offer, the College Financing Plan (CFP) — formerly the Financial Aid Shopping Sheet. It detailed the results of a recent survey of 1,000 students, 750 parents, and 230 financial aid experts that asked them to highlight concepts they found to be unclear on the CFP. The survey did not compare the CFP to the Shopping Sheet or to institutional aid offers.

Of those students — which included high schoolers, current college undergraduate and graduate students, and recent graduates — 89% had “gone through the college shopping process at least once,” and 60% had applied for financial aid four or more times. 

The report found that 74% of those students who held a credential reported confusion over the wording or an amount in the CFP, and almost 3 in 5 parents surveyed found some wording or phrasing to be unclear. However, that finding, CampusLogic’s Carlo Salerno and Amy Glynn wrote, was not a surprise. 

“The fact that award letters are confusing isn’t new,” they wrote. “What’s new and striking in this unique data set is the clear disparity. There is clear disparity between the terms and numbers students and parents said tripped them up, and what financial aid experts expected them be confused over. There is also clear disparity in levels of confusion depending on financial situation, age, and race.”

Salerno and Glynn found that while 94% of the financial aid experts surveyed said they believed that students would find parts of the aid offer to be unclear, they did not know the extent to which students would be confused. Specifically, the authors found that “students reported more unclear wording in the grants and scholarships, loan options, other potential education benefits, and the supplementary school information (SSI) sections of the award letter than what aid experts reported they thought students would report.”

The authors noted that the most confusion stemmed from how students’ Expected Family Contribution (EFC) and cost of attendance (COA) were calculated, and were also concentrated in the areas of the CFP detailing the EFC, SSI, and loan options. For example, 40% of respondents who said that they didn’t know what a word meant in the offer pointed to the EFC as confusing, and 24% who did not know why a term was included in the CFP selected the EFC as well. 

“[W]hy do we find it so necessary to present the [EFC] to students and parents?” the authors questioned. “A made-up number generated by a complex calculation rooted in no sense of reality about what a family can contribute to a student’s education confuses everyone. Though important to institutions for the awarding formula, would we drive clarity by omitting it?”

Following a membership survey about ED’s updated CFP, NASFAA asked ED to adjust the wording included in the EFC section to read, “as calculated by the institution,” “as calculated by ED,” or "as calculated by ED and/or the institution using a formula prescribed by law." NASFAA also wrote that ED should remove the academic year from the COA section, and rename it “Estimated Costs of Attendance.” NASFAA also asked ED to allow institutions to choose whether they include both on and off campus COAs in that section, among other changes.  

In addition to a mismatch in expectations, the CampusLogic report noted that students from different income brackets reported that they found different parts of the aid offer confusing. For example, students and parents from families earning less than $25,000 were “almost twice as likely” to find the COA section to be unclear. At the same time, just 2.4% of students in the $15,000 to $25,000 income bracket found the section about grants and scholarships confusing, compared to 16% in the income bracket over $200,000. 

The authors also highlighted different confusions based on age. Specifically, they found that students between the ages of 18 and 24 were the most likely to report that they didn’t understand what a term meant, and those surveyed between the ages of 39 to 45 were most likely to find a term to be too vague, or question why it was included in the aid offer. 

Finally, the authors found that discrepancies in students and parents’ ability to understand the aid offer based on race. They wrote that “black, Asian, and Hispanic respondents were all more likely than white respondents to find net costs numbers unclear,” and that “Hispanic and Asian respondents were more likely to find loan option amounts unclear.” Plus, Asian respondents were three times as likely to find the section detailing work options to be confusing, they found.

In 2013 NASFAA conducted a study in which it asked its respondents to compare and evaluate three aid offers — ED’s sample offer, an offer created from recommendations from a NASFAA task force, and an aid offer combing aspect the other two offers. However, respondents noted that each aid offer included confusing components, and there was no clear winner. 

NASFAA has since supported bills that mandate that institutions utilize a set of standard terms and definitions, such as included in its Code of Conduct, to allow for more compatibility between aid offers, yet also provide institutions the flexibility to personalize their offers.   

The authors of the CampusLogic report also argued that “clear guidelines should be established that allow for better comparability and comprehension for consumers at an individual level,” which they wrote “would include standard language, definitions, and calculations, while allowing for highly personalized content to meet the unique needs of students and their families.”

“If you take only one thing away from this report and these recommendations, let it be this: the research conducted by CampusLogic strongly supports the notion that there is no one thing that confuses every student and parent,” the authors wrote.


Publication Date: 10/21/2019

Mark K | 10/21/2019 8:41:22 PM

To date, there have been no evaluations of the impact of different award letter designs on outcomes, such as the percentage who borrow and the average amount of debt per borrower at graduation.
There is undoubtedly confusion about the term expected family contribution (EFC), since it is a bit of a misnomer, given that most families will pay more than the EFC due to unmet need and the inclusion of loans in the financial aid package.
But, what is most important is to address aspects of award letters that blur the distinction between gift aid and loans, such as (1) the failure to separate grants and scholarships from student loans and other forms of education financing, (2) the failure to define net price unambiguously as the difference between the full cost of attendance (including direct and indirect costs) and gift aid, and (3) the presentation of need-based loans (and other loans) as cutting college costs.
When financial aid award letters intentionally mislead families concerning the true cost of college and the amount they must pay now and in the future, is it any wonder that student and parent debt continues to grow?

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