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The Hidden Challenges of Financial Aid Award Letters

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by Megan Fisher

At the end of the long journey through college admissions, one of the most rewarding days for most students should be when financial aid award letters arrive in the mail. They’ve spent countless hours reviewing math problems and vocabulary flashcards for the SAT, improving their GPA, exploring different fields of study at a variety of colleges, and filling out application after application–not to mention the additional effort required to research and apply for financial aid. After all this effort, receiving financial aid offers should be a time for students to celebrate their hard work and confidently make a decision about their next educational step.

Unfortunately, for many students from low-income backgrounds–as well as those who are the first in their family to attend college–the reality of this moment involves a great deal of confusion and hidden risk.

Due to frequent inconsistencies and confusing language–and the lack of readily available resources to make sense of these inconsistencies–many financial aid award letters end up being subtly misleading and generally difficult to understand. In these circumstances, what should be a straightforward document can seriously hinder low-income students’ ability to make a smart college decision and manage their finances when they arrive on campus.

One problem with many financial aid award letters is that they don’t clearly distinguish money  that comes with no strings attached from awards that need to be repaid. It makes sense that a financial aid award letter would list every type of aid on offer in one letter, whether it’s scholarships, grants, work-study opportunities and loans. The problem is, these letters often use abbreviations and other obscure terms to identify different types of awards, like COA, EFC, Federal Direct Loan Sub, and Cal Grant A Estimate. Additionally, award letters often do not include any specifics about the loans included, such as required minimum payments, due dates, and interest rates. For any student without the right resources and guidance to call on–which includes many low-income and first-generation college students–this lack of detail requires a lot of work to understand, and can result in students taking on more debt than anticipated.

Another confusing element of these letters is work-study programs, which offer paying jobs to students with financial need. Work-study salaries are also included in the mix of money represented in financial aid award letters, but what letters frequently don’t mention is that these salaries are only estimates. Once on campus, students must pursue and secure their work-study employment on their own, depending on availability of jobs and their school schedule. These jobs available may pay lower than what was projected on students’ financial aid award letters, leaving students to scramble to make up for gaps in their aid.

Additional confusion arises for students because the majority of universities format their letters differently, making it hard for students to compare different options. Students need to decode each letter individually, representing a significant investment of time just to find out how much each college is offering to determine if they can even afford the institution. This seemingly celebratory step in the college application process seems at times more like a trap in that students can’t easily figure out which college they can realistically afford.

So what can be done to reduce this confusion and help students from low-income backgrounds make more informed decisions about college?

An important step in clarifying financial aid award letters is for colleges to adopt a standardized financial aid award letter template, such as the Federal Financial Aid Shopping Sheet. This shopping sheet is an attempt to simplify the financial aid information presented to prospective college students, allowing for easier comparison to understand which college is the most affordable. Unfortunately, only 44% of degree-granting institutions have adopted the Federal Financial Aid Shopping Sheet so far.

Additionally, colleges can include more detailed information about the information included in financial aid award letters. To start, colleges should explain each line-item and dial back on  insider terminology that’s unfamiliar to many students and parents. When loans are included, repayment schedules and interest rates need to be included as well. Finally, more context about the true cost of college would also help students to recognize that the cost of attending might differ from the estimate included in their award letter. It’s unrealistic to assume that the cost of college will be the same for every student, so let’s help them understand the range of what they could be paying.

Finally, students receiving financial aid need more resources and coaching once enrolled and on campus. They will continue to manage their financial aid for the duration of their undergraduate schooling, not just when award letters arrive, and should be supported all the way through graduation.

Confusing and unclear financial aid award letters have the potential to mislead students resulting in increased debt and financial uncertainty, and potentially preventing students from continuing their studies. If financial aid is intended to help students from low-income backgrounds pursue and earn undergraduate degrees, it must be explained and delivered in a way that sets students up for success.

Megan Fisher is a Development Coordinator at CollegeSpring.