Senator Al Franken Introduces Legislation to Standardize Financial Aid Award Letters
May 28, 2012
Senator Al Franken (D-MN) introduced the Understanding the True Cost of College Act (S.3244) on Thursday, May 24, 2012 with bipartisan support. This legislation will standardize college financial aid award letters to help students and parents make informed decisions concerning the tradeoffs between college affordability and college quality. It will also help students and their families make smarter borrowing decisions.
Students graduate with ever-increasing amounts of debt each year. “Part of the problem is that students often don’t have a clear picture of how much their education is going to actually cost them,” said Sen. Franken. “My legislation will require schools to use a universal financial aid letter so students and their families will know exactly how much college will cost, and will help them compare apples to apples when deciding what school a student will attend.”
College costs are one of the few major life cycle expenses that are not yet subject to mandatory statutory disclosure requirements. Consumers currently get better information about buying a car from the Monroney Window Sticker or about credit card costs from the Schumer Box than they do about paying for college.
A financial aid award letter survey conducted by Fastweb in 2010 reported that almost seven-eighths of students and parents said that financial aid award letters should be standardized to make them easier to understand and to compare. Other noteworthy findings from the survey included:
- Almost a third of financial aid award letters did not mention the college’s cost of attendance.
- More than three-fifths of financial aid award letters did not include basic information about loan terms, such as interest rates, loan term in years, monthly payment, total payments and total interest paid over the life of the loan.
- More than half of the financial aid award letters did not mention the net price, the difference between the cost of attendance and just grants and scholarships.
Senator Franken’s legislation establishes minimum requirements for the information that must be included in a financial aid award letter.
The first page of the award letter must include the essential information needed to understand the true cost of college:
- The college’s cost of attendance, including tuition and fees, room and board, books and supplies, transportation and miscellaneous personal expenses.
- Gift aid awarded to the student, such as grants, scholarships and other forms of financial aid that do not need to be repaid.
- The net price, which is the difference between the cost of attendance and the gift aid. This is the amount the student and his/her family must pay from savings, income and loans in order to cover college costs.
The legislation requires each type of financial aid to be displayed separately from the others, to avoid confusion concerning the different types of aid. Information about grants, loans and student employment may not be commingled and must be separated by subtotals.