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Making Sense of Financial-Aid Packages for College

There's not much of a window between when colleges send out award letter for financial aid and when students must decide if they will accept the offer. Letters go out in March or April and most colleges require a deposit by May 1.

Not only is there a time crunch, but since there is no uniform template for conveying the information, the aid packages can be difficult to compare.

National Public Radio on Thursday aired a piece on the challenge of decoding financial-aid letters. (Listen to the story here.) It notes that some letters are filled with acronyms and abbreviations; others lump scholarships and loans together. The story noted, too, that some colleges front-load aid to make it more affordable for freshmen, but then reduce help in later years—essentially pulling a costly "bait-and-switch" maneuver.

Since college is such a huge investment, families want clarity about how much the bottom-line cost of attendance is being reduced with grants and scholarships versus how much of the package relies on loans.

About two-thirds of students who graduate with a bachelor's degree borrowed money for their education and leave with an average debt of about $29,400, according to The Project on Student Debt, an initiative of The Institute for Student Access and Success.

No Perfect Model

The National Association of Student Financial Aid Administrators has been actively involved  in researching how to better communicate with families about financial aid. Last year, it conducted consumer testing of various financial-aid letters, concluding that there was not one perfect model, but offering recommendations to bring transparency to the process.

NASFAA President Justin Draeger said members in recent months have been asked for feedback on new criteria to be added to the organization's code of conduct and ethical guidelines about award letters. The updates are still being reviewed, but in a phone interview, Draeger told me he expects they will be adopted and rolled out in coming weeks.

The new language will require institutions to clearly disclose the cost of attendance, separate grants from loans, and use standard financial-aid terminology. It's a move "to hold ourselves accountable," said Draeger. "There is a floor to which we need to adhere."

However, NASFAA does not favor legislation requiring standardized award letters.

"We have concerns about the prescriptive nature of the proposals," said Draeger. "Our take is that schools should have flexibility." (Among the bills introduced is a Senate measure to specify the content of financial-aid letters.)

Draeger said his impression is that most schools are already in compliance with the new code-of-conduct criteria to be released soon, but it is a step aimed at providing guidance for all. It is "not acceptable" for schools to rely on jargon or relay confusing information to students, he said.

With the new code of conduct and educational sessions to explain it to members, Draeger said the changes should be apparent in next spring's round of award letters. 

Another idea to consider, said Draeger, is a broader change to the application process so it isn't so compressed. Currently, financial-aid applications must be completed in January and February based on a family's prior year's finances. If families could use income amounts from the year before that, the entire process would be backed up and allow students to get financial-aid letters after they apply to a school but before acceptance.

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