THE TRUTH ABOUT EVEN THE MOST GENEROUS FINANCIAL AID PACKAGES
When parents apply for financial aid to cover the cost of higher education, they often assume that any package they’re offered must be enough. However, it doesn’t take most families long to learn that even the most generous financial aid packages can still leave gaps that at best contribute to students’ chronic stress and inability to take full advantage of the college experience. At worst, students facing insurmountable gaps between the costs of education and what they and their families can contribute will drop out. In the paragraphs below, we highlight some of the issues students who rely on aid face.
FINANCIAL AID PACKAGE OFFERS ARE NOT TRANSPARENT
Financial aid offer letters are a critical tool in helping families determine who they can afford college. Unfortunately, many of these letters are shrouded in opaque language and complex calculations, leaving families confused and unsure of what their true responsibilities will be.
A 2018 report, Decoding the Cost of College, analyzed 11,000 award letters from over 900 colleges and determined that offer letters lack consistency and transparency.
Less than half of the letters examined included a bottom-line amount that would be the responsibility of the student and family.
One-third of the offer letters examined did not include any cost information to contextualize the financial aid offered.
The Report recommended a standardized method of communicating financial aid packages so that families are not left to decipher the bottom line on their own, which can mean the difference between graduating with confidence and facing crippling debt. It’s time for institutions to take a hard look at their approach to financial aid offer letters and work toward greater transparency and clarity for families.
COLLEGES UNDERESTIMATE NON-TUITION COSTS
Determining the expected family contribution is also a flawed process. Once the FAFSA process determines what a family can pay, grants are rarely available to cover it and the family must either pay it or take out loans.
In her book, Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream, Temple professor Sara Goldrick-Rab explained that because a college’s “cost of attendance” establishes the top cap for a student’s aid eligibility when colleges underestimate the cost for books, transportation, living and personal expenses students and their families scramble to make up the difference.
A 2022 the U.S. Government Accountability Office reported that financial aid letters underestimate the costs to attend school by excluding key items or omitting critical information regarding funding sources. According to the report,
91% of schools surveyed did not clearly list the full amount the student is expected to pay after considering scholarships and grants.
22% of schools don’t provide sufficient information about costs in their aid letters; they instead just lay out the details of scholarships, work-study and loans.
As Professor Goldrick-Rab explains this is because federal law requires colleges that federal financial assistance cannot exceed what the schools have determined to be “cost of attendance.” Without question, the cost of tuition has increased over the years, but what’s often ignored is how an inaccurate estimate of living costs – transportation, books, supplies, can result in an aid package that’s far too low.
Colleges’ estimates are not standardized and may be too low. Goldrick found that colleges in Washington, DC claimed living costs ranging from $9,387 to $20,342. Since each school’s calculation of the “cost of attendance” determines the top cap for aid eligibility, a way too low estimate is likely to mean that families will not receive necessary aid and must make up the difference.
The pull-yourself-up-by-your-bootstraps crew may dismissively encourage students in this predicament to seek outside scholarships. But this won’t help. Federal aid may be reduced by the amount of the outside scholarships to make sure that the student’s total aid package does not exceed what’s been determined (perhaps incorrectly) to be the total cost of attendance.
FINANCIAL AID NEVER COVERS ALL COSTS
Even under the best of circumstances, financial aid packages are unlikely to cover the true costs of taking full advantage of the educational opportunities of colleges. Study abroad programs and fees and equipment associated with extracurricular activities are particularly likely to be out of reach for many low income students.
The constant scramble to make ends meet can take its toll on even the most resilient student. Instead of taking full advantage of the thrills of academic and personal discovery, low income students spend those precious early adult years worrying about money and finances. Financial woes may not only distract students from reaching their full potential for some those struggle can completely derail educational progress. There is a direct correlation between income and risk of dropping out of college.
