A recent report discovered that financial aid letters lacked consistency and transparency, while the amount of aid was often not enough.

When it comes to that monumental decision of how to pay for college, financial aid letters reportedly fail to clearly deliver the information that families and students need.

In a new report by think tank New America and uAspire, a nonprofit leader on college affordability, researchers analyzed over 11,000 financial aid award letters from the 2016-2017 academic year sent to 6,000 high school seniors nationwide. The review discovered that financial aid was not only insufficient to cover college costs for countless students, but financial aid letters lacked consistency and transparency.

In addition, the analysis disclosed that students receiving Pell Grants fell short when trying to cover their costs. This was an average of almost $12,000. The gap persisted even when students made cost-saving decisions including whether to attend a public versus private college or live at home versus at school.  

More Detailed Results

To better analyze the financial aid letters’ shortcomings, researchers conducted a qualitative analysis by reviewing 515 letters. They noted seven key findings:

  • Confusing Jargon and Terminology: From 455 colleges offering an unsubsidized student loan, there were 136 unique terms for the loan, including 24 that excluded the word “loan.”
  • Omission of the Complete Cost: More than one-third of the letters excluded cost information to contextualize the financial aid offer.
  • Failure to Differentiate Types of Aid: Seventy percent of the letters grouped all aid together but didn’t provide definitions to indicate how grants and scholarships, loans, and work-study differed.
  • Misleading Packaging of Parent PLUS Loans: Nearly 15 percent of letters included a PLUS loan as an “award,” making the financial aid package look more substantial than it was.
  • Vague Definitions and Poor Placement of Work-Study: For institutions offering work-study, 70 percent did not provide an explanation of it or define its differences from other aid types.
  • Inconsistent Bottom Line Calculations: Only 40 percent of letters calculated what students would need to pay; the 194 institutions had 23 different ways to calculate remaining costs.
  • No Clear Next Steps: About half of letters provided information about what to do regarding accepting or declining awards but included inconsistent policies.
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“Without common language, a common standard of terms, and how they are defined across stakeholders, it can be confusing and misleading,” said Laura Keane, one of the report’s authors and chief policy officer at uAspire, according to Diverse Education. “What we know from a broad and deep anecdotal level is that the current practices are creating deep confusion for students, parents, and practitioners.”

So what’s next? At the end of the report, researchers recommended systemic changes across federal, state, and institutional entities.

The report suggested that federal policymakers undergo consumer testing and set standards for award letters through federal mandate. State governments should use uniform calculations, formats, and terms for award letters across their higher education systems, according to the report. Finally, colleges and universities should create additional student-centered financial aid offers and tools, and align these efforts with key departments that administer student financial needs.