As part of the ongoing effort to educate prospective students and their families on the ins and outs of college finance, the Obama Administration unveiled the final form of the model financial aid letter that allows side-by-side comparison of the offers made by each individual college. This makes it easier to understand the costs involved with attending each of the schools and facilitate more informed decision-making.
The template for the letter was developed by the U.S. Department of Education in partnership with the Consumer Financial Protection Bureau, a federal-level consumer watchdog, established as part of the implementation of the Frank-Dodd Act passed in the wake of the financial crisis. At a time when the student loan burden is growing rapidly, the main goal of the new letter is to make sure that students “know before they owe.”
Prior to the letter being introduced, parents and their kids often had to operate almost in the dark when comparing financial aid options offered by different schools. Financial aid offer letters often weren’t clear about the total costs of attending the school and how much debt the student stood to incur after four years of attendance. An apples-to-apples comparison between the financial aid options offered by all schools was likewise difficult, complicating the process of figuring out which school is offering the best deal.
As a result, too many students leave college with debt that they didn’t understand at the time that they entered school. While many financial aid award letters provide this information, some can be confusing, lacking clear distinctions between grants and loans, as well information about post-graduate outcomes associated with the institution. These obscurities make the task of comparison-shopping for the most affordable and appropriate college even more difficult.
The format of the new “Shopping Sheet” lays all these costs out clearly and in a way that is easy to both understand and compare. In addition to laying out the total costs per year of attending the school, the letter also contains such information such as student rates of loan defaults and what percentage of those enrolled go on to graduate.
Later this week, U.S. Secretary of Education Arne Duncan will publish an open letter to the country’s colleges and universities asking them to take the new Shopping Sheet as a model for their own financial aid letters and set the goal to do so by the 2013-14 school year.
Additionally, colleges who agree to the Principles of Excellence for Serving Military and Veterans will begin using this form during the 2013-14 school year. Institutions of higher education interested in adopting the Shopping Sheet may contact the Department of Education at [email protected] for additional information.