Fact Checked

Financial aid letters may obscure the true cost of college, report finds

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As student debt continues to grow, a new report finds that colleges and universities are not making college financial aid information transparent.

College affordability nonprofit uAspire and think tank New America published a new report that shows colleges use inconsistent and often convoluted language in financial aid award letters.

The report analyzed more than 11,000 award letters from more than 900 institutions sent to nearly 6,000 different students who graduated high school in 2016.

Among the findings using a subset of 515 award letters from different institutions: The financial aid award letters included confusing jargon and terminology, incomplete cost information, and misleading packaging of Parent PLUS loans.

For example, some institutions use terms that lump grant and loan aid together. Within the subset of 515 award letters, the report found that of the 455 colleges that offered an unsubsidized student loan, there were 136 different terms for that loan, with 24 of those terms not including the word “loan” at all. Nearly 15% of the letters included federal Parent PLUS loans as an “award,” making the financial aid package appear far more generous than it actually was.

What does this actually mean?

The report found that the students who received award letters and a federal Pell Grant were still on the hook for an average of almost $12,000 in out-of-pocket expenses for the first year.

That financial aid gap persisted even when the students went to public universities or lived at home to offset some of their expenses.

And as for the loan-terminology problems described in the report, conflicting terms could lead to confusion over what is a loan and what is financial aid.

Why should you care?

Student loan debt has been on the rise in the United States for years. According to the Federal Reserve, student loan debt hit $1.5 trillion in the first quarter of 2018.

That’s part of what makes the report’s findings so worrying. Student loan debt may be leading people to put off things like buying houses or saving for retirement. But the report notes that one-third of the letters reviewed within the subset of 515 award letters didn’t state the cost of attending the school.

Even worse, only about half of those letters told students what to do to accept or deny awards. The letters that did provide next steps had inconsistent policies. Because of confusing language around how much it actually costs to attend the school and deadlines for accepting aid, students may end up accepting offers that they can’t afford or missing out on financial aid because they didn’t know the next step in the financial aid process.

What can you do?

Are you or your child deciding on a college but unsure if your financial aid awards will cover the bill? Here are a few things you can do.

  • Do your own research. Read through the college financial aid packets in full. Subtract any grants, scholarships and additional aid from the school’s published tuition costs to find your total cost.
  • Look for private scholarships. After determining your total cost, look for private scholarships you can apply for. You can often find scholarships through community and professional organizations.
  • Start a 529 plan early. If you’re saving for a child’s college fund, consider opening a 529 college savings plan. These plans are state sponsored and, while you pay taxes on the money you contribute to the plan, you’re not taxed on its gains provided you use withdrawals for qualified education expenses.