GAO: Institutions Are Not Providing Clear and Standard Information in Financial Aid Offers

By Maria Carrasco, NASFAA Staff Reporter

Institutions are not providing students clear and standard information in their financial aid offers, often not including or understating the net price, which could confuse students and their families, according to a new report out of the Government Accountability Office (GAO). 

In the report, GAO analyzed financial aid offers from a nationally representative sample of 176 colleges, which include offers with at least a Pell Grant, a direct subsidized or direct unsubsidized loan, and a Parent PLUS loan. GAO assessed those offers against a list of 10 best practices for financial aid offers developed from guidance from the Department of Education (ED) and the work of a commission of 22 federal agencies. Those best practices include institutions itemizing key direct and indirect costs, providing a total cost of attendance (COA) that includes key costs, estimating the net price (by subtracting only gift aid from key costs), and separating gift aid, loans, and work-study, among other things. 

Comparing those best practices with institutional aid offers, GAO estimates that 63% of colleges follow five or fewer of the 10 best practices. No college in the 176-college-sample followed all 10 best practices. 

Additionally, an estimated 55% of institutions didn't itemize key direct and indirect costs, 55% didn't provide a total cost of attendance that includes these key costs, and 91% didn't estimate the net price by subtracting only gift aid from key direct and indirect costs. Of that 91%, an estimated 41% of colleges didn't include a net price in their offers, and 50% of colleges that did include a net price, understated it. Twenty-two percent of colleges didn't provide any information about college costs in their aid offers. 

"Colleges present cost and financial aid information differently, making it difficult for students and parents to compare offers and college affordability," GAO states. "Although a recent law requires colleges to provide standard financial aid information to certain student veterans, the lack of financial aid offer requirements could lead other students to make uninformed and costly decisions, such as enrolling in an unaffordable college."

NASFAA President and CEO Justin Draeger responded to the GAO report, saying NASFAA supports transparent and clear financial aid offers.

"Students and families need clear and understandable financial aid information in order to make wise college-going decisions," Draeger said. "The GAO report released today — in which NASFAA participated — highlights the ways schools are falling short in communicating college costs to students."

Last week, NASFAA announced the Paying for College Transparency Initiative, a partnership between 10 higher education associations with the goal of creating a set of principles and standards about what information should be included in institutional aid offers so the resulting documents are clear, meet high standards of transparency, and contain consumer friendly information, while still allowing for institutional customization. 

Additionally, NASFAA this year updated its aid offer models to provide institutions with an example of how they could create their aid offers to accurately include all required NASFAA aid offer Code of Conduct components. 

GAO notes that there are two ways colleges underestimate the net price, both of which can potentially confuse students about the true cost of college. The first is not basing the net price estimate on key direct and indirect costs, which 38% of colleges underestimated. The second is subtracting more than gift aid — such as student loans, Parent PLUS loans, or work-study — from the estimate of the net price. 

Many colleges also didn't label and source types of student aid in their offer letters, with 24% of colleges not labeling the type (grants, loans, etc.) and 58% not labeling the source (federal, state, institutional, or private) of the aid in their offers. GAO said that information helps students determine what type of aid is being offered and is valuable for students to identify federal grants and loans. 

Also problematic, according to GAO, was the 53% of colleges that did not include actionable next steps in their financial aid offers, which can leave students uncertain about what they need to do next. Sixty-five percent of colleges didn't provide key details and distinctions for at least one type of student aid in their financial aid offers, such as minimum academic requirements to maintain a scholarship or explaining details about work-study. 

GAO is calling on Congress to consider legislation that would require colleges to provide students financial aid offers that follow best practices in order for all students to "receive the information they need in their financial aid offers to make informed education and financial choices."

The report was conducted at the request of Rep. Virginia Foxx (R-N.C.), ranking member of the House Education and Labor Committee. Foxx and Rep. Lisa McClain (R-Mich.) on Monday also introduced the College Cost Transparency and Student Protection Act, which would set new requirements for financial aid offers. Read more about the legislation from NASFAA's policy team

"Since these institutions refuse to hold themselves accountable, Congress must pass legislation to protect students and families," Foxx and McClain said in a statement. "That's why we are introducing the College Cost Transparency and Student Protection Act. This legislation will empower students and families throughout the college shopping process and prevent postsecondary institutions from hiding their true price tag."

GAO states in the report that greater standardization in financial aid offers, such as by broader use of ED’s College Financing Plan, could "improve clarity and allow students to accurately compare costs and available aid across different colleges." 

"Federal law already requires colleges to provide standard information to veterans, but it would take further congressional action to expand this requirement to all students," GAO states. "Without such action, Congress will not be able ensure students and parents receive the clear and standard information they need to make more informed decisions about college." 

Following the release of the report, Sen. Chuck Grassley (R-Iowa) called the results "disturbing" and renewed his push for the bipartisan Understanding the True Cost of College Act, which he previously introduced with Sen. Tina Smith (D-Minn.) and Rep. Young Kim (R-Calif.) in 2021, and in 2019. The bill takes a prescriptive approach to aid offers by mandating the use of standard language and a standard format, setting strict standards for the way financial aid and enrollment information can be displayed on the first page of the aid offer, and including multiple disclosures that must be included when specific aid types are listed.

Meanwhile, NASFAA has supported the bipartisan Financial Aid Communication and Transparency Act of 2019 — or FACT Act — which would mandate the use of standard terms and definitions, as well as require institutions to include a "quick reference box" allowing students to quickly compare aid offers.

"The higher education community has the capability to make change now," Draeger said. "We look forward to working with schools, stakeholders, and our federal partners to help students and families better understand the cost of college today."


Publication Date: 12/6/2022

Peter G | 12/6/2022 2:15:05 PM

For what it's worth, the '10 Best Practices' link above goes to a list of.... 8 practices. Not sure what the other two are.

In terms of those 8, honestly I think the "award/letter is bad!" verbiage issue is nitpicking at best. I could be wrong, but I've never seen anything convincing that calling it an award is fundamentally altering reality for families. It feels like something where someone became convinced it derived from ill intent rather than just a need to call it something uniform.

In the bigger picture, I agree with David - what's missing in both the GAO report and most of the subsequent reporting is anyone digging into the why, and whether a single uniform form mandated across all sectors actually improves understanding.

Jeff A | 12/6/2022 10:28:17 AM

The GAO report is highlighting a significant fault. This isn't a financial aid office issue.

The facts are nearly half of even those that graduate are regretting their HE choices, mostly program choices, but also institution and degree level as well. AND research shows that on average families end up spending 40% more on their degree than they expected.

There is no question institutions need to do a better job of disclosing outcomes by program. Median total billed/paid cost, time to completion, grad rates, debt and post-grad salaries. HE is completive and will improve when the outcomes are better understood and the data available. Of course this has to be in context to the type of institutions and student body demographics, but that is not difficult to do.

You know more about the phone you are considering than the institution and program of study. A lack of transparency is driving higher ed costs, and debt, unnecessarily higher than it needs to be.

Aesha E | 12/6/2022 10:2:27 AM

Something definitely needs to be done. Whilst some schools aren't choosing not to follow some of these recommendations maliciously, there absolutely are institutions that obfuscate their costs for their own ends. It would be a good idea as suggested to learn a bit more about why schools may not follow one suggestion or another, but there's no excuse for lumping all costs together, or using loans (especially PLUS) to show how "affordable" it is without identifying that the cost without loans.

David S | 12/6/2022 9:43:59 AM

All this has resulted in so far is an opportunity for elected officials and social media pundits to get up on the soapbox to tell everyone within earshot that colleges and their Financial Aid Offices are unethical monsters who stay awake at night concocting ways to destroy students' and their parents' lives. I exaggerate only slightly.

Have any of these critics ever reached out to Financial Aid Offices who don't follow these suggested standards and asked them why they don't? This is the type of thing that happens when colleges can't retain or recruit sufficient staff in the Financial Aid Office. We're up to our eyeballs in official and enforceable laws and regulations that can result in audit and program review findings, which in turn result in financial liabilities to schools and in some cases, the loss of employment to staff. On the other hand, no auditor or state or federal program reviewer is going to write a school up for failure to follow "rules for good written financial aid offers" that someone tweets about. So, priorities.

And when you have financial aid from state, federal, institutional and private resources that fluctuates with enrollment status, citizenship status, timeliness of the submission of bureaucratic but mandatory paperwork, a cost of attendance with direct and indirect costs that are subject to fluctuation based on everything from the number of credits a student enrolls for to what meal plan they sign up for to whether they buy new or used textbooks...and then it's the Financial Aid Office's fault that people are confused and that the process lacks transparency?

Susan J | 12/6/2022 9:39:52 AM

Are 176 award notifications truly a "representative" sample? I would estimate that is about 3% of all institutions.

Jaime M | 12/6/2022 9:16:18 AM

I think most schools nowadays drive students to their portal to view aid offers and COA components online. I don't know of many schools who still send paper letters with award details. Also, I agree about families being confused about COA components and direct charges. At my school, we have it broken down between "billable" and "not billable" but they all think we are charging them transportation costs anyway.

James C | 12/6/2022 9:1:52 AM

Then Congress and USDE need to come up with a template and standard language we all must use. Hopefully they will consult all the stakeholders in developing . I am not confident it will be clearer to families. Even if you spell out all the components of the COA on an award letter, many families will not understand it and confuse it with direct charges.

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