Coming Soon: New Documents for College Financial Aid Offers

Sometime within the next year or so, the Department of Education is expected to release a new document that will help students and parents understand and compare financial aid packages from multiple colleges and universities.

The DOE has released a beta test version of the document, called the College Financial Plan, which would replace the current Financial Aid Shopping Sheet and could be used by schools to explain financial aid packages instead of their financial aid award letters or as a supplement to that letter.

Only schools with students eligible to receive federal military and veterans’ educational benefits who have applied for federal Title IV financial aid using the Free Application for Federal Student Aid (FAFSA) will be required to provide those students the College Financial Plan, but the DOE encourages other institutions to provide the document as well due to their “responsibility to be transparent about their costs and the aid available to meet those costs.”

The new form is similar to the existing form, but it provides more information about work study options, private loans and grants and more flexibility for schools to add additional information,  and it relocates some key data points, like expected family contribution.

The DOE has been soliciting public comments on the proposed plan, which it expects will be used for the 2020-2021 academic year.

With that in mind, the National Association of Student Financial Aid Administrators (NASFAA), along with ASA Research, conducted focus groups of high school and college students and their parents to gauge their sentiments about the new financial aid document and solicited feedback from a representative sample of colleges and universities across the country. It found that that  for students and parents, more information is not necessarily better.

Among its key findings:

• Students and parents want financial aid offers to focus squarely on costs and the financial aid available to cover those costs. They are far less interested in student outcomes like salaries of graduates majoring in one subject or expected graduation rate of a particular school.
• They also want more attention paid to terms and conditions of loans and work options. “So much attention is being paid to income-based data to help parents and students make good decisions about where to attend college when what they want to know is how to pay for college, help explaining terms and conditions of financial aid,” says Justin Draeger, president of NASFAA.
• Students and parents define financial aid differently than schools do. Students and parents define financial aid as grants and scholarships; schools include loans and work study in their definition, according to Draeger. NASFAA recommends “an inclusive process that consists of schools, students, and state and federal stakeholders [that] than help standardize terminology and overcome inherent issues.”
• Students prefer having grants and scholarships grouped together; loans grouped together and work study programs also combined but separated from the other two, which the new and old aid documents do, though in different ways.
• The new College Financial Plan seems to provide students with a better understanding of costs and net balances whereas the Shopping Sheet provides students and parents a better understanding about federal student aid amounts.
• 72% of higher education institutions plan to adopt the new College Financial Plan for use in the 2020-21 award year when it will fully replace the Shopping Sheet, up from 67% who indicated current use of the Shopping Sheet.

“Policymakers, lawmakers and bureaucrats in DC need to put themselves in the shoes of both schools and students, and avoid the temptation to think ‘they know best,’ said Draeger in a statement. “The best way to know what students and parents are thinking is to ask and test them, through rigorous qualitative and quantitative consumer testing.”

For example, the NASFAA research found that “graduation rate and median borrowing information is not useful to students and parents at this point in the college decision process — they may have previously looked at that information when deciding where to apply, but at this point they are simply interested in the bottom line of how much they will need to pay. … Prospective students intend to graduate and repay their loans, and thus do not find these statistics relatable.”

NASFAA offered several recommendations for changes it would like to see in the final version of the College Financial Plan, among them the addition of a line about how students and parents should proceed to get more information about financial aid. This could include a college’s financial aid office web address or a student portal address that has information about accepting financial aid packages and receiving disbursements.

— Check out College Is Even More Expensive Than You Think on ThinkAdvisor.