Who, How and Why to evaluate offer letters
You can evaluate your own letter using the methods we describe below. But to get these grades and explanations, we sent copies of these award letters - with all information that would identify the student AND the college blacked out - to a mix of national experts, counselors, parents and high school seniors. We also called or emailed the financial aid office of the college that sent the letter for explanations. Among our volunteer evaluators are, in alphabetical order:
- David Hawkins, Director of Public Policy for the National Association for College Admission Counseling. (Our toughest grader.)
- Donald Hossler, Director of Projects on Academic Success and former vice chancellor of enrollment services at Indiana University.
- Mark Kantrowitz, founder of Finaid.org.
- John Kozup, Director of Villanova University's Center for Marketing & Public Policy Research.
- Michael McPherson, former president of Macalaster College, current president of the Spencer Foundation, and co-author of 'The Student Aid Game.'
- Dana B. Rosenfeld, former assistant director of the Federal Trade Commission's Bureau of Consumer Protection.
Common sense is the best guide, but to assist our evaluators, and students, we have summarized and condensed recommendations from a paper on award letter 'best practices' by the professional association of college financial aid officers, the National Association of Student Financial Aid Administrators.
With the aid of William Lutz, an expert on doublespeak who helped the Securities and Exchange Commission create 'plain English' standards for investors, we developed a quick and easy checklist for students and parents. Lutz suggests awards letters would best serve students and parents if they answered five basic questions:
- What is the total cost (sticker price, including books, travel and other likely expenses) for one year at this school?
- How much free money (also called grants or scholarships) did the student get?
- How much will the student have to pay (i.e borrow, work for, or take out of savings) for the first year?
- What are the options for raising or paying the money the student owes?
- What is the student supposed to do next? (Whom should they call with questions or an appeal for more aid? What forms have to be submitted by what deadline? )
Although it might be expecting too much to fit more than that on one page, students need easy-to-find answers to at least six more questions to make wise decisions. We call these 'extra credit' questions:
- How many hours a week would a student have to work to earn the work-study award?
- What does the student have to do to renew each of the scholarships and grants each year? What is the likelihood that the student will meet those conditions?
- What are the terms, conditions and monthly payments of the loans?
- Is it made clear that the student or parent is can decline to take any or all of the awarded loans?
- If a PLUS loan is included in the award, is it made clear this is dependent on the parents' credit, and that parents with acceptable credit can get a PLUS loan from any school?
- How much will it cost to graduate from this college?
Many students, parents, counselors and financial aid officers say that the vast majority of schools can and should create one easy-to-understand and compare award letter that provides enough information to allow families to budget accurately.
- Students and parents need full and complete information to avoid making life-changing financial mistakes. At an average cost of $50,000 to $60,000, a college education is one of the biggest financial decisions a person makes in his or her life. High school students, and parents (many of whom have not attended college) who aren't alerted to the true total costs and lifetime financial impacts, can make serious financial mistakes. Angela Whitlow, program director of the Scholarship Foundation of St. Louis, worries about colleges' failure to make the value and impact of loans crystal-clear. 'Students are borrowing blindly' because they often don't realize how much of their aid package is debt, or that they can choose not to borrow as much as the school is awarding.
If colleges did provide clear and easily comparable information about their true costs 'They'd have people making wise decisions,' Whitlow says. 'But who wants that?' Sean Callaway, who has spent years counseling college applicants as director of Pace University's College Placement and Internships, says he's seen too many cases in which naive students only realize after they get to college that they need money for things like books. "They call their parents by Thanksgiving and say 'I am out of money.' But the mother and father are working two jobs" already. The student often has little choice but to borrow or drop out. Many governmental leaders are also calling for colleges to provide clearer and more complete award letters. Sen. Ted Kennedy, (D-MA), tells Financialaidletter.com: 'It's clear that students and families want much better information
about the total cost of higher education. Colleges need to do their
part by issuing financial aid award letters that accurately describe the
costs of college beyond tuition and fees, like costs for housing, books,
supplies and transportation. In addition, when colleges offer loans as
part of an aid package, they should clearly state whether those loans
are lower-interest loans from the federal government, or so-called
'alternative' loans, which are typically higher-interest."
- Before charging students thousands of dollars, colleges should provide at least as much basic consumer information as supermarkets and car dealers: Sean Callaway notes: 'When you go into any supermarket in the US, they give you a price per unit." He's heard some college officials object that they can't provide the information because of balky computer systems or forms. "We figured out a way to put someone on the moon'and people say 'It's my computer system. I can't make a form'...It is very simple," Callaway says. "What the customer needs is a list of charges and list of resources. And each letter needs to have the same format' so that it is easy to compare college apples with college apples, he says. In addition, since many parents don't have access to the web, schools should send out a paper award to make sure the family gets all the information they need.
- Full information is needed to discourage unscrupulous college officials from attempting to mislead students: Even some inside colleges say that the real reason financial aid officials don?t want to tell students details like total costs, size of loans, and likelihood of renewing scholarships, is that the truth would scare students away. Donald Hossler, former vice chancellor for enrollment services for Indiana University, says that officials in charge of recruiting more students and raising more money often tell aid officers how to draft their award letters. ?A lot of strategy goes into how to describe total costs. If you keep it lower, the school looks less expensive,? and sometimes, he says, 'they stick a PLUS (parent loan) in there to make it look like the full need is met,' when, in fact, the loan payments can soon become onerous.
- Many college financial aid officials say they want to provide better information, but need public pressure to do so: Privately, some university officials say that they know they could and should provide easy-to-compare full cost, loan and scholarship renewal terms. But they see their prospective students get lured away by misleading financial aid information from less scrupulous schools. So they often feel they have little choice but to resort to the same tactics. They need pressure from outside to persuade their bosses to do the right thing.
Many financial aid officers object to this or any one-size-fits-all format for the following reasons:
- Technological: Joe Paul Case, director of financial aid for Amherst College, and a member of the NASFAA committee that drafted the best practices recommendations, notes, for example, that the committee only suggested that many of the important details be provided 'somewhere in the materials' sent to the student, not necessarily on the official letter. While 'budget details ideally should be in the body of all colleges' award letters, different computer systems used by colleges may mean that's not actually feasible,' he says. In addition, a growing number of colleges are shifting to electronic notification and thus simply posting their awards on a website, where students can easily click through to lots of detailed information.
- Too much information is confusing: Mark Bandre', director of financial aid for Hendrix College in Conway, Ark., who also served on the NASFAA commission that drafted the best practices recommendations says that while his school makes its direct costs 'tuition, fees, room and board ' very clear on its award letters and on its website, it only provides the federally required total Cost of Attendance (including books, travel, and other reasonable expenses) to prospective students who call. 'It is important to stress that we are not trying to hide anything - we'll happily share cost of attendance information with anyone at any time 'It's just that the typical family does not understand a college billing process, and we have found that families wind up with a more accurate interpretation of the process and costs based on the manner in which we communicate. While I do personally still believe that listing a full COA on an award letter is utopian, such simply does not work well in every environment and Hendrix is one of many perfect examples of this statement.'
- The cost isn't set yet: Many financial aid officers say they can't tell the student how much a year will cost until the student chooses from an increasingly dizzying variety of meal and housing plans. And many public colleges simply don't know their costs for the 2007-2008 academic year because their state legislatures haven't voted on tuition yet.
- There's debate over how to calculate a student?s net cost: The federal government defines its PLUS parent loans as "aid," which allows schools to include those loans in their award packages. That often results in a bottom line figure that gives students the impression that they'll only have to pay a few hundred dollars. Many financial aid officers feel it is misleading to include PLUS loans as a part of financial award totals, since parents with poor credit can't get the loans. Parents who are eligible can get a PLUS to cover the full net cost of any school their child attends.
If you have comments or suggestions about evaluating award letters, email us at comments @ financialaidletter.com