Helping Students and Families Understand the Cost of College

Rising college costs and increasing student loan debt make it vital for students and families to have clear and accurate information about their financial aid packages and what they will pay for a postsecondary degree.

The Obama administration is challenging colleges and universities to provide clearer and more comparable information to students and families about financial aid and the cost of college.

On the surface, this challenge seems relatively straightforward. But you don’t need to dig very deep to realize that providing accurate, comprehensive, easy-to-understand, and comparable college cost and financial aid information can be a real challenge. This is because college pricing and financial aid is complicated and highly customized for every student. Information that is vital for one student may be irrelevant or misleading for another.

For example, if a student lives on campus, it is pretty easy for the school to outline the costs of room and board. If a student doesn’t live on campus, it is a greater challenge for the college to estimate the cost of room and board. A student who commutes to campus is likely to be in a better position to estimate his or her cost of living. If the school overemphasizes living estimates — as opposed to focusing on direct expenses payable to the school — it could be more confusing to a student than helpful and potentially cause them to borrow more than necessary.

Another challenge for colleges is providing the right amount of information. Colleges want to ensure that the information they provide is accurate and comprehensive, but don’t want to overwhelm students with too much information. Finding the right balance is a challenge, and can differ dramatically between schools and students. 

Meeting the Challenge

Despite these difficulties, colleges are stepping up to meet President Obama’s worthy, but complicated, challenge. To help in this effort, financial aid administrators from student aid offices around the country formed a task force that developed and issued recommendations to ensure student financial aid award letters provide students and families with information that is clear, concise, and consistent. The recommendations were developed by a National Association of Student Financial Aid Administrators (NASFAA) task force of working financial aid professionals representing every sector of higher education (private, public, for-profit, two-year, four-year, and graduate/professional).

Students and families often rely on student financial aid award letters to make critical decisions about which college to attend. These letters outline students' estimated cost of attendance and student aid package, including grant and loan eligibility. However, a lack of consistency between schools’ award letters can cause confusion and make it difficult for students and families to make comparisons.

The task force reviewed proposals from the Obama administration, evaluated sample award letters from various colleges and universities, and surveyed financial aid offices for feedback. They also consulted with consumer groups, other higher education associations, and student aid experts.

This information was used to develop recommendations to help standardize award letter terminology and elements while maintaining flexibility for colleges and universities to customize award letters to meet the specific needs of their unique student populations. These recommendations were formally adopted by the Board of Directors of NASFAA.

A Look at the Recommendations

NASFAA’s award letter recommendations are similar to some proposals put forth by other student aid experts and legislation recently introduced in the Senate, but there is a significant difference. NASFAA stresses the importance of allowing schools to maintain some flexibility to customize award letters to meet the unique needs of their students. This would allow a school with no on-campus housing to display information about the cost of room and board in a different way than a school with a large student population living on campus. This customization would help campuses avoid unintended confusion that could arise if every school was forced to use the same standardized award letter template, even if some elements weren’t relevant to their students.

“As Congress and the Obama administration explore ways to improve financial aid award letters, we encourage them to consider the recommendations put forth by financial aid professionals,” said NASFAA President Justin Draeger. “Incorporating the recommendations of the professionals who assist students on a daily basis and have the best working knowledge of the financial aid programs will help maximize the effectiveness of award letters and avoid unintended, negative consequences of over-prescriptive standardization.”

Improving student aid award letters is an important step to help improve students and families’ understanding of college costs and student aid, but it is only one tool. There are limits to how much information can be conveyed with this single tool. Even if there was a perfect student aid award letter, it wouldn’t completely eliminate confusion about college costs and financial aid because of the complex nature of this information.

Similarly, colleges and universities are critical to helping students and families understand this information, but they can’t tackle the challenge alone. A comprehensive approach is needed to ensure student and families get the support they need to make informed decisions about college and financial aid.

The Obama administration has taken the important first steps with its initiative to help students and parents make more informed decisions about higher education. If the initiative is successful, it could go a long way to helping prevent students and families from suffering the negative consequences of making uninformed decisions about higher education.

The National Association of Student Financial Aid Administrators is a nonprofit membership organization that represents nearly 20,000 financial aid professionals at 2,800 colleges, universities, and career schools across the country. Each year, financial aid professionals help more than 16M students receive funding for postsecondary education.

Based in Washington, DC, NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. NASFAA's report on improving financial aid letters is available online here.

Haley Chitty is the director of Communications for the National Association of Student Financial Aid Administrators (NASFAA).