A Proposal for Coherent Student-Centric Financial Aid Offers

Before the holiday break, I read with great interest—and little surprise—articles that appeared in the Chronicle and Inside Higher Ed around the lack of clarity (and, in some cases, honesty) in financial aid offers. The title of Eric Hoover’s December 5 Chronicle article summarizes the issue well: “Most Colleges Omit or Understate Net Costs in Financial-Aid Offers, Federal Watchdog Finds.”

Scott Jaschik makes a more pointed choice with his title: “GAO Blasts Colleges on Aid Offers.”

Both stories lay bare what anyone who has gone through the financial aid process themselves already knows all too well: colleges generally do a lousy job when it comes to clearly communicating their costs to students and their families.

Eric Hoover captures how understanding financial aid can be, at once, both a morass and a vacuum:

… each year families, high-school counselors, and college-access advisers must confront a frustrating fact: What an applicant gets from one college often looks nothing like what they get from another. Institutions have long embraced different ways of breaking down the costs that families must pay; some fail to clearly differentiate grants and loans. And many aid offers are full of jargon and terms that few earthlings know or understand.

How did we get here?

The Government Accountability Office analyzed three separate financial aid offers from each of 176 randomly selected 2- and 4-year colleges. (The GAO had been commissioned by Congress to study how colleges are helping—or, more likely not helping—students and families who were on the receiving end of about $112 billion in Title IV funding, like the Pell Grant and subsidized loans.) The GAO reviewed these letters to assess the degree to which they were following the ten best practices established by the Department of Education, and informed by the Financial Literacy and Education Commission.

What are those best practices? 

  1. Itemize key direct (tuition, fees, etc.) and indirect costs (books, transportation, personal expenses)
  2. Provide a total cost of attendance (COA) that includes those key costs
  3. Estimate the net price (by subtracting only gift aid from key costs)
  4. Separate gift aid, loans and work study
  5. Do not include a parent PLUS loan or, if included, separate and differentiate it from student loans.
  6. Label type of aid
  7. Label source of aid
  8. Include actionable next steps
  9. Highlight key details and distinctions about loans, grants and work-study
  10. Do not refer to the offer as an “award.” (Loans and work-study aren’t awards.)

(Source: United States Government Accountability Office Report to the Republican Leader, Committee on Education and Labor, House of Representatives, November 2022)

How many followed all ten of the best practices? 

Exactly zero.

OK, but how about nine of the ten? 3 percent. Eight of the ten? Another 6 percent. In fact, 63 percent followed five or fewer of the best practices. 

It’s worth noting that most of these ten practices also appear—in slightly different form and with the more forceful verb “shall” attached to them—in the Code of Conduct for members of the National Association of School Financial Aid Administrators.

Why are so many colleges out of step with the Department of Education’s relatively straightforward best practices?

The GAO offers three reasons in their report, based on interviews with stakeholders.

The first—and I’m paraphrasing here—is that the colleges that follow the best practices, especially the first three, are suckers. The line of thinking is that it doesn’t pay to be transparent about your net cost if your competitors aren’t being similarly clear:

Specifically, prospective students may suffer “sticker shock” from receiving a financial aid offer with an all-inclusive but larger cost of attendance and choose to enroll in a college whose offer presents a seemingly smaller, but less-inclusive cost of attendance.

In other words, “If my competition is doing it—even if it’s deceptive—I need to do it, too.” 

This sort of obfuscation hurts students and their families—especially those who are unfamiliar with the nuances of college financing—who will subsequently receive bills that reveal the first part of the truth (the direct costs they must pay), and discover the second part (the indirect costs that they still must bear, like books, computers, food and travel expenses).

This practice also hurts colleges, which may end up either losing students who accepted an unclear offer, or needing to intervene with more resources (human, time and financial) to retain those students, some of whom may be living on the edge of food insecurity or other challenges that prevent them from fully participating in the college experience they anticipated.

(If colleges are relying on mutually assured unclear financial aid offers as an enrollment strategy, they are likely suffering from other issues related to market position.)

A lack of resources–technological and otherwise  

The two other reasons why colleges are not applying these practices to their financial aid notification speak more to a disconnect between desire and ability: they want to follow these best practices, but are constrained by their technology or their resources, or both.

Speaking to technological constraints, the report notes that “Officials from a national organization of financial aid administrators said that the software some colleges use to create financial aid offers may limit colleges’ ability to meet best practices.” And on the issue of resource constraints, the report offers, “A few stakeholders may not have the staff or financial resources to revise their financial aid offers to meet best practices.”

RHB can help

If your institution is limited by either or both of these last two constraints, my colleagues at RHB have a way of helping you not only do the right thing, but to do it in a way that is sustainable for your team to manage, especially if you are in the position of never feeling like you have enough hours or people to do the work you need, much less want to do.

Our Slate and Related Technology team, led by Erin Gore, has implemented hundreds of solutions that leverage the power of Slate to translate data from multiple sources—whether it’s your SIS or one of the many software solutions in orbit around that system—into coherent, elegant and user-friendly (for you and your students) views.

Whether it’s as part of an RHB Applicant Student Experience portal or simply making better use of the capabilities of your student-facing decision release views of Slate, we can empower you to implement a financial aid notification that not only incorporates the best practices articulated by the Department of Education and NASFAA, but expresses the values of your institution in a way that is coherent with your brand.

Furthermore, we can also help you and your team develop communication flows in Slate that not only drive your prospective students to complete every important step in the financial aid process, but also foster financial aid literacy for them and their families as they move ever closer to making one of the biggest investments of their lives.

The GAO’s recommendation portends more government intervention of the kind that, while meeting “the heart is in the right place” threshold, may fall short of what actually might work. (See Net Price Calculator, simplified FAFSA, etc.).  

Federal law does not require colleges to include clear or standard information in the financial aid offers they provide all students. Education has instead encouraged colleges to follow best practices, but adoption has been limited … Further congressional action would be necessary to ensure that all students receive the information they need in their financial aid offers to make informed education and financial choices.

Let’s not wait for Congress to mandate a solution. We can act today to do the right thing.

Your friends at RHB can help. Let’s have a conversation.

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Ken Anselment

Ken is the Vice President for Enrollment Management at RHB.