[For the last two weeks at Higher Ed Watch, we have run posts from student aid expert Mark Kantrowitz (see here and here) in which he argued that the financial aid award letters that colleges send out each spring need to be standardized both to protect the best interests of students and their families and to make them easier to understand and compare. Because this is an important public policy issue, we invited Justin Draeger, the president of the National Association of Student Financial Aid Administrators, to provide an opposing view. He took us up on the offer. Read on to find out why Draeger believes that "a federally mandated, standardized form" would do more harm than good.]
By Justin Draeger
Financial aid award letters can and should be improved to better help students understand the costs of higher education and the aid available to them. But a federally mandated, standardized form would fail to meet the needs of students, create more confusion, and stifle institutional innovation. Instead, we should focus on standardizing terms and definitions and promoting key elements to be included in each award letter.
One Size Does Not Fit All
If all colleges and student populations were the same (or even similar), then a standard award letter could be useful. Because there is so much variety, institutions need the flexibility to design unique award letters that highlight information that is most relevant to their student demographic. A cooperatively designed, optional form that models at least one good approach would be a useful catalyst for institutions to review their practices in light of their students’ needs.
For example, Institution A provides on-campus housing and serves traditional-age college students who generally live on campus. Their award letter should highlight the cost of room and board as part of the cost of attendance. In contrast, Institution B is a commuter college that doesn’t provide on-campus housing and primarily serves working adults. Estimated information about room and board is mostly irrelevant to students at Institution B because they have been living on their own for years. In fact, including that information on Institution B’s award letter would likely generate even more questions.
Advocates for a single, standard award letter stress that students need a way to compare the out-of-pocket costs of multiple schools. But that comparability is only one possible use of an award letter. The majority of aid recipients aren’t interested in comparing the costs between schools because they are returning students who are interested in how they will meet their educational expenses at one particular school, or they intend to enroll at the school nearest their homes.
Simply put, requiring a standard letter would hinder institutions’ ability to tailor their award letters to highlight relevant information and exclude irrelevant information.
Mandates Encourage More Confusion, and More Forms
If the government mandates a single, standard format for award letters, many schools would likely offer two award letters: one mandated by the government, and one that actually meets the needs of their student population.
Advocates for a mandated, standardized form argue that without federal mandates, schools will purposefully mislead students. Giving schools discretion in how they relay information should not be seen as a green light to misrepresent award offers or purposefully mislead students. In fact, there are consumer protection laws and Title IV program integrity regulations that prohibit schools from offering misleading consumer information. Schools that violate those laws should be prosecuted to the fullest extent of the law. Most schools are simply interested in communicating in the most relevant and effective way possible, and this is where community generated model letters can be useful.
Mandated Forms Stifle Innovation
Institutions need the flexibility to quickly alter their award letters to mirror the evolving world of higher education and to take advantage of new technology. If the Department of Education issues regulations requiring institutions to use a standardized letter, it will be impossible for award letters to keep up with emerging technology and communication tools. Altering regulations is a time consuming process that cannot hope to keep up with innovative technologies or ideas. Even an official form with minimal regulations behind it requires passage through a cumbersome government approval process that does not respond well to changing times.
Examples of innovative award letters abound. The University of Michigan provides students with an electronic notification award letter that allows them to see the total loans they have taken to date and calculate their future loan payments. Anne Arundel Community College provides a tool that allows students to build their own semester costs based on the courses they’re taking and their residency status. Other schools provide specific key elements in their award letter, but then link to several other forms of pertinent consumer information through dynamic online award letter tools.
These types of customizations would be made much more difficult – if not impossible – through a single, mandated standardized award letter.
Hijacking Award Letters for Unrelated Policy
Proposals to federally mandate award letters present another challenge: What begins as a focus on award letters quickly spreads into unintended and tangential policies. A federal mandate becomes the proverbial “camel’s nose under the tent flap.”
During the U.S. Department of Education’s public hearing on award letters, some comments went far beyond the intended discussion. Topics ranged from: the quality of certain Federal Work-Study jobs, the practice of awarding more campus-based aid than students accept, paperwork due dates from schools, financial aid application dates from states, and packaging processes at individual schools. Those are all good topics for discussion, but all fall outside the boundaries of award letters.
In perhaps the best example of how quickly mandates on standardized award letters can expand into unrelated areas, one federal official was met with a room full of silence when he asked if award letters ought to contain measures of institutional quality, like graduation rates.
Forget the nose, this camel seems to be coming in backside first!
It’s not inconceivable that in a few years a mandated award letter would also be required to have repayment rates, default rates, a list of campus crimes, fires, and petty thefts, a reference to the Constitution and the pledge of allegiance.
These topics may be worthy of debate, but not under the guise of a standardized award letter.
Broad Community Agreement on Key Elements
Award letters would improve without new regulations or mandated forms if the Department of Education provides a community-based model (or several models) that include (1) standardized terms and definitions, and (2) key elements that should normally be included in an award letter.
Trying to compare award letters between different schools that call the same federal loan program by different names is impossible. What is called an “unsubsidized Stafford loan” at one school may be called a “William D. Ford Direct Stafford” at another and simply a “Direct Loan” at a third. A consumer friendly online glossary produced by the Department of Education is probably the best way to standardize these program names.
In addition, each award letter should provide four key elements to clearly illustrate the costs of education and help students compare award letters from different schools:
- Cost of attendance.Student budgets are essential to successful financial planning by families, and effective budgeting requires an understanding of true costs.Schools should be given discretion to breakdown direct and indirect costs in a manner that is most helpful to their students.
- Estimated costs after subtracting gift aid (net cost).This information conveys the amount that the student and/or family will be responsible to pay out-of-pocket or through “self-help aid” (loans and work study). Creating standard terminology to identify this amount would be helpful for students who are comparing costs between schools.
- Self‐help aid and estimated remaining costs. Standard terminology and definitions would be useful to identify the financing or work-study that is being offered to help cover remaining costs.
- The cost of borrowing. Clear presentation of current and projected costs of borrowing helps students understand that loans only defer payment of educational expenses.
No Silver Bullet
Requiring a mandated, standardized award letter is not a silver-bullet solution to prevent confusion among aid recipients. College costs and financial aid packages are complex and institutions will never be able to accurately distill all scenarios onto a single, predetermined sheet of paper. Financial aid administrators and other on-campus professionals—not federal agencies—are the groups best equipped to understand the informational needs of their particular student population. While certain measures can be taken to ensure consistency in terms, taking away the ability for schools to customize and innovate would be a step backwards in consumer information.
Justin Draeger is the president and CEO of the National Association of Student Financial Aid Administrators (NASFAA), a position he has held since July 2010. Before coming to NASFAA in 2006, Draeger worked for ten years in student aid, first as a financial aid director at the Douglas J Aveda Institute in Michigan and then as a lead regulatory analyst at the Michigan Guaranty Agency. He holds a Bachelor’s of Science Degree in Resource Management from Brigham Young University and a Master’s in Business Administration Finance from Baker College. His views are his own and do not necessarily reflect those of Higher Ed Watch or the New America Foundation.
[NOTE TO READERS: Now that you’ve heard from both sides in this debate, who’s right? We’d love to hear your thoughts on this important issue.]