By now, you should have received your financial aid award letter. The May 1st deadline is rapidly approaching and the window to make your final decision is steadily closing. You would imagine award letters would be designed to be easy to understand, allowing you to choose the best course of action to suit your situation. However, the reality is that they are often much more complicated than they need to be. What should be a simple matter of addition and subtraction can be bewildering, due to inaccurate or even missing information. If that doesn’t give you pause, perhaps it should.
Consider these statistics regarding the information contained (or more tellingly, not contained) in the average award letter:
- About a third of all award letters don’t contain all college costs: While schools will calculate expenses for tuition and room and board, that is where their obligation ends. Left out of these estimates are; textbook costs, supplies, health insurance and estimated personal expenses. Not taking these additional expenses into consideration can leave you with an unrealistically low estimate of how much financing you will actually need.
- Many award letters underestimate the actual costs: While perhaps not as bad as leaving them off altogether, undervaluing projected costs can be similarly damaging. Underestimating the cost of textbooks, supplies and other incidentals can lull you into a false sense of security, causing serious problems if what you’ve set aside comes up short.
- Around half of award letters classify loans, even parent loans, as financial aid: Loans are not financial aid, and they shouldn’t be considered as such. Loans fill the gaps (if any exist) in financial aid packages. The distinction between money you are awarded and money you have to pay back with interest is one of colossal importance.
- The majority of award letters do not mention the student’s Expected Family Contribution (EFC): Your actual college costs should match up to your EFC, with some additional unmet need. The amount of that unmet need is dependent on how much you receive in institutional grants. There is a lot of grant money out there. Be sure to go after as much of it as you can, and be mindful of those deadlines.
Award letters could be so much simpler!
Not only should award letters be easier to understand, it would be fairly simple to make them that way. Divide them into three sections:
- Section one: List all of the components associated with the attendance of college, not just tuition and room and board, but all of the other incidental expenses listed above.
- Section two: From the total calculated in section one, deduct all federal, state and institutional grants and scholarships so the student has a clear picture of what they will need to cover themselves.
- Section three: A clear list of options to cover the remaining balance, including parent and student loans.
Unfortunately the bad news doesn’t end with underestimates and missing costs. According to financial aid expert Mark Kantrowitz around half of all colleges front load their grant money. Front loading is the practice of offering more financial aid to freshmen and then once they have them on the hook, decreasing the aid in the following years. It’s the very definition of a “bait and switch” and Kantrowitz is not afraid to call colleges out on the shady practice.
Another common practice of colleges is the displacement of outside scholarships. This is especially discouraging as students will work hard to qualify for these scholarships to help mitigate the out of pocket costs, only to have their award from the college reduced in order to compensate for it. This effectively nullifies the benefit of pursuing and achieving the scholarship in the first place. While displacement is not uncommon, mileage may vary depending on your school of choice.
Now the big question: Why?
It is certainly no secret that award letters are needlessly complicated. As was laid out above, it wouldn’t be very difficult to retool them to present the information in a more plain and straightforward fashion. The questionable practices of front loading and outside scholarship displacements beg the question: How much are they benefiting from the confusion? You would think they would want students to be fully aware of the financial responsibility they were taking on, if for no other reason than to insure that they would get their money.
We should not forget that higher learning institutions are businesses too. Whether it’s because overhauling the system currently in place would require more resources than they are willing to spare, or there is a more nefarious reason for maintaining the obfuscating status quo; there should be no doubt that if they thought it was in their best interest to change it, they would. That suggests to me that they like the award letters just the way they are. That is concerning to me, how about you?