The vast majority of colleges and universities are failing their prospective students when it comes to telling them what they can expect to pay, according to a new report from Congress’s General Accounting Office (GAO). The report estimated that nine out of 10 colleges either don’t include or underestimate the net price of attending in financial aid letters. This makes it challenging for prospective students to figure out which school is most affordable for them.
“It’s hard to think of many financial issues that rise to more importance” said Dr. Kelly Rosinger, an associate professor at the Penn State University College of Education. “Students take on debt that [has] lifelong implications.”
According to the GAO report, students who pick a college that is unaffordable for them are more likely to have to cut back on essentials like food while attending and are more likely to drop out. Having more student loan debt may make borrowers less likely to become homeowners or to be able to save for their own or their children’s futures.
“It’s critically important for students to understand that they are borrowing, if they are borrowing, and how much they’re borrowing,” said Rosinger. “Award letters have really not done a great job of distinguishing between grants and loans, sometimes intentionally.”
To examine the role that colleges’ financial aid disclosures play in the confusion, the GAO surveyed a nationally representative sample of 176 schools and compared their aid information to 10 best practices from the Department of Education and a commission of 22 federal agencies.
These best practices include itemizing key direct and indirect costs (like tuition, housing, and books), offering a cost of attendance estimate that includes these key costs, and providing an estimate of the net price by subtracting only gift aid (grants and scholarships that don’t need to be repaid) from the cost of attendance.
The GAO estimated that 41% of colleges don’t include a net price and that 50% understate it, often by excluding key costs such as books and including aid that must be repaid, like loans. 55% of schools don’t itemize key costs, and 55% don’t provide a total cost of attendance that included the key costs. 22% don’t provide any information on college costs at all in their financial aid offers. The margin of error was +/- 7%.
About one third of colleges compensated for the opacity of their aid offers by also sending students the College Financing Plan, a template from the Department of Education that meets all 10 of the report’s best practices. However, colleges are not legally required to provide clear and standardized information in their financial aid offers. The GAO recommended that Congress consider making it mandatory, potentially by requiring that all schools send prospective students the College Financing Plan.
House Education and Labor Committee Republican Leader Virginia Foxx of North Carolina, who had requested that the GAO produce the report, introduced a bill with Republican Lisa McClain of Michigan in response to its findings. The College Cost Transparency and Student Protection Act would establish standardized terms and definitions for key financial information. Another bill, the Understanding the True Cost of College Act, introduced in 2021 by California Republican Young Kim and Illinois Democrat Raja Krishnamoorthi, would create a standardized offer letter.
The bills’ chances of passage are uncertain.
“I have some hope,” said Rosinger. “I think that this is probably the most momentum we have seen. I think the government highlighting this as a concern really forces Congress to take some kind of action.”
But she also expressed doubt.
“I want to be optimistic, but anytime I hear ‘higher education,’ then ‘Congress,’ I’m naturally a little pessimistic,” she said. Congress has been slow to act on anything higher education-related over the last decade. There’s other pressing things that need to be done, and higher education takes a backseat.”
Congress hasn’t been the only site of action, however. Last week, a coalition of 10 higher education associations representing college presidents, financial aid offices, and admissions counselors, among others, formed the Paying for College Transparency Initiative to create clear standards for what information should be included in aid offers, as well as for common, understandable language.
“I think we’ve got a reasonable chance of getting broad agreement [because of] the breadth of the coalition,” said Peter McPherson, leader of the Initiative and former president of the Association of Public and Land-grant Universities.
However, Sophie Nguyen, a senior policy analyst at New America, a left-leaning think tank, is skeptical.
“I think it’s a way for them to be playing defense,” she said. “They’re trying to show that they’re doing something.
”Nguyen said that the coalition included neither students nor researchers who had previously been working on the issue and argued that the prior task forces created by some of the organizations had not made a difference.
Rosinger agreed but saw the coalition as indicative of the issue’s salience.
“I think it adds to the momentum,” she said. “These organizations, regardless of what drove them to take action, are taking action now.”
However, she pointed out that even if Congress passes legislation to address cost clarity, it will not solve a deeper problem.
“Financial aid award letters are just reflective of a much larger systemic issue: that for many students, college is simply unaffordable,” she said. “We can explain to them very clearly what it costs and allow them to compare across institutions. But this is window dressing on a real underlying issue.”
Jon Edelman can be reached at [email protected].