In response to the Government Accountability Office's report examining institutional aid offer practices, Rep. Virginia Foxx (R-N.C.), ranking member of the House Education and Labor Committee, and Rep. Lisa McClain (R-Mich.) on Monday introduced the College Cost Transparency and Student Protection Act, which would set new requirements for financial aid offers.
The bill would require standardized terms and definitions, content, and formatting, but does not go so far as to establish an aid offer template, as other proposals have done. The proposed legislation, in fact, prohibits the establishment of a template.
It does, however, make significant changes to the way financial aid eligibility is currently communicated to applicants, turning the aid offer into a two-step process by which students are first offered aid only for their direct educational expenses. Students would then opt in to requesting aid for indirect expenses, after which a more customized aid offer with their estimated indirect expenses and aid eligibility is issued.
The initial aid offer would include only total direct costs, defined as tuition and fees plus other required expenses presented as an itemized list. It would describe eligibility for grants and scholarships by source, the conditions under which students can expect federal and institutional grant aid to be renewed in future years, whether these funds can be used to pay for indirect costs, and whether and if applicable, how outside grants or scholarships would reduce institutional grant aid eligibility. A disclosure that grants and scholarships don't have to be repaid would also be required in the financial aid offer.
The aid offer would require schools to calculate an out-of-pocket costs figure related to direct costs, defined as direct costs less grants and scholarships. Schools would be required to disclose other financing options to cover out-of-pocket direct costs in the following order: cash or other personal resources, Direct loans (except Direct PLUS loans), and work-study. Loans must be clearly labeled as subsidized or unsubsidized and students must provide active acceptance of both Direct Loans and work-study. They would also have to include a disclosure that loans must be repaid with interest and that work study is contingent upon the availability of jobs and is disbursed to students as hours are worked.
Institutions would be required to disclose that other financing options may be available, including Direct PLUS loans; institutional, state, and private loans; and payment plans, if applicable. Loans could not be presented in a way that "indicates or implies that such loans reduce the amount owed to the institution or reduce the out-of-pocket costs"
Finally, the initial aid offer would include a disclosure that the financing options for indirect costs may include loans that must be repaid with interest. The institution would be required to collect confirmation from the student that they were seeking financial assistance for such indirect costs.
Upon receipt of the student's confirmation that they seek financial assistance to cover indirect costs, the school would offer students the opportunity to select the indirect costs they wish to receive aid to cover. If grant and scholarship eligibility exceeded direct costs outlined in the initial aid offer, the remaining eligibility would be included in the subsequent component of the aidoffer covering indirect costs. The aid offer would require schools to calculate a total out-of-pocket costs figure related to indirect costs, defined as indirect costs less grants and scholarships applied toward indirect costs. The same financing options included in the direct cost aid offer would be repeated in the indirect costs aid offer for students to decide to use for indirect costs.
Certain elements would be required on both the direct and indirect cost components of the aid offer:
Pulling the direct and indirect costs components together, aid offers must include the total cost of attendance, equal to the sum of the direct and indirect costs, and the total out-of-pocket costs, equal to the sum of the out-of-pocket direct and indirect costs.
Institutions would have to include a delivery confirmation for electronically issued aid offers.
The Department of Education (ED) would be required to conduct consumer testing with various designated stakeholders to determine the required formatting and terms and definitions of aid offers.
The bill would also make changes to the College Scorecard, displaying separate cost estimates and net price figures for direct and indirect costs, which would require changes to institutional reporting procedures.
This proposed legislation is the latest congressional effort to reform student aid offers. NASFAA has long been active in these efforts and recently embarked on a project with nine other higher education organizations to improve aid offers and promote transparency on college costs.
Publication Date: 12/6/2022