Most college students these days need some financial help to pay for their education. Faced with soaring tuition costs, it's important for students and their families to compare financial aid packages from different schools. But the way it is now, it can be difficult to know exactly what is being offered in a financial aid package and what the net cost will be for attending that school.
The new Financial Aid Shopping Sheet, a template for financial aid letters prepared by the U.S. Department of Education and the Consumer Financial Protection Bureau, is designed to provide this information in a standardized format.
"Instead of being full of jargon and other information you might not understand, it gives you clear information about how much you have to pay, how much debt you'll need to take on and how much you might owe after graduation, including an estimate of monthly payments," explained Rohit Chopra, student loan ombudsman with the Consumer Financial Protection Bureau.
Fees will be broken down into categories, such as tuition, housing, meals, books and supplies. It also lays out clearly what is a loan and what is a scholarship.
“We've seen financial aid award letters that combine loans to make them look like grants — sometimes by accident, sometimes on purpose," said Rich Williams, higher education advocate with U.S. PIRG, a consumer group that strongly supports the new form. "Finally, for the first time, students can use this tool to make an apples-to-apples comparison of different colleges."
Kay Lewis, director of financial aid at the University of Washington, says many schools already provide this type of information, but the way it’s presented can be confusing.
"We hear from students that some of them don't find it easy to tell the difference between what are loans and what are grants on some award letters," she told me.
Lewis believes a cover letter with a consistent format would let families feel comfortable that they found the right information from each school.
The Shopping Sheet also shows what percentage of a school’s students graduate after six years — an indication of how successful that college or university is at providing the anticipated educational experience — and the loan default rate for students attending that institution.
The bureau is working on new online tools that will let families take the information provided on these Financial Aid Shopping Sheets and plug them into a Web tool or app that allows them to get personalized results. For example, they could enter how much they had saved toward college, or how much the student plans to earn while at school.
The Shopping Sheet is voluntary
Colleges and universities are not required to provide the new Shopping Sheet, but most are expected to use it in some form.
Two weeks ago, U.S. Secretary of Education Arne Duncan published an open letter to college presidents across the country asking them to adopt the Shopping Sheet. He pointed out that this form was created with input from thousands of students, parents, college counselors, financial aid administrators and other higher education officials.
“Students should not have to wait until after they graduate to find out the size of their monthly student loan payment,” he wrote. “Our goal is that more students will arrive at school each fall less worried about how they will pay for college and more focused on how they will complete college.”
The National Association of Student Financial Aid Administrators doesn't like the Shopping Sheet. The group's president, Justin Draeger, says he is concerned with the use of a standardized form.
"Institutions need flexibility to design a financial aid award letter that best meets the needs of their unique student population,” he wrote on the group’s Web site.
Even so, 10 major institutions have pledged to adopt the form in the 2013-2014 school year. These include Arizona State University, Syracuse University and Vassar College, as well as the university systems in Maryland, Texas and New York. This covers more than a million students
In April, President Obama issued an executive order that requires schools that accept funding from military benefits to provide the shopping sheet to those students who use this military financial aid starting next year. It’s hoped this will encourage these 1,500 institutions to use the form for all students.
Sen. Al Franken (D-Minn.) has introduced a bill that would require all institutions of higher education to provide the Financial Aid Shopping Sheet. The “Understanding the True Cost of College Act” has bipartisan support.
My two cents
We want our children to get a good education. But students and families must be able to budget for this major investment. They need a way to easily and accurately compare financial aid packages. The Financial Aid Shopping Sheet makes this possible.
Smart shoppers rely on standardized labels for nutrition information on food, energy consumption on appliances, mileage on cars and interest rates on credit cards.
Why in the world would anyone not want to provide this information for students? Don’t they deserve to make an informed decision about their future?
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