By Jack Remondi
on April 26, 2019
This month college-bound students receive financial aid letters from the schools where they were accepted. For many families, it is the time they have been waiting for: now they know where they’ve been accepted and what it will cost them to attend college.
Or do they?
These financial aid letters often include confusing jargon, omit the complete cost, and do not differentiate between different types of aid, according to an analysis from New America and uAspire. Of 455 colleges, researchers found 136 unique terms for unsubsidized student loans, including 24 that didn’t even include the word “loan.”
Federal student loans are available to all regardless of credit history, college readiness or course of study. About 6 in 10 bachelor’s degree recipients take out federal loans — and it's a rare student that isn't confounded by the process.
I had one parent tell me, “I just click, sign and sweat.”
Students and families deserve more support than a no-questions-asked loan.
For those evaluating financial aid packages and deciding which school to attend right now, I suggest they:
- Read letters carefully. The biggest award may not be the best deal if it's mostly loans or comes from the most expensive school. Once students receive all their financial aid award letters, they should carefully compare the aid packages offered to them. Make sure they know what is a grant and what will need to be repaid.
- Find their net price. The net price is calculated as the total cost of attendance, minus grants and scholarships. Students can use their award letter to calculate their net price (or estimate using the school’s net price calculator on their website).
- Check for renewals. Unless otherwise stated, the aid package applies to only the upcoming semester or year. However, some aid, such as grants and scholarships, may be renewable for more than one year.
- Plan ahead. Multiply their estimated net price by four years for a bachelor’s degree to estimate the total minimum cost they can expect. Don’t forget to consider tuition increases and the cost of room and board.
- Take advantage of grants and scholarships first. These options do not need to be repaid and should be exhausted first.
- Keep borrowing to a minimum. Federal student loans are usually packaged in the financial aid award letter, and loans from private lenders can fill the gap. Use a financial calculator to estimate monthly payments after graduation to ensure they fit a likely budget and expected career earnings. If not, consider cost-cutting steps like a lower cost college or trimming living expenses.
- Meet deadlines. Most college admission decisions will be released by the end of this month, and with an impending reply date in early May. Others may have year-round rolling admissions and more flexible deadlines.
- Seek guidance. Students and families who have questions about their financial aid award letters or other college-funding issues should contact the financial aid office at each school they are considering. Don’t be afraid to ask detailed questions before making this big and important decision.
Not surprisingly, students and families are genuinely concerned about their ability to afford the increasing cost of a college education. We need to focus on how much people are paying and borrowing for college, not just the tools to help them pay it back.
Students need to know exactly what they’re getting into before they sign on the dotted line.
The U.S. Department of Education earlier this month encouraged colleges to be clearer in what financial aid they’re offering students and how much their schools will cost to attend. The federal government should also act to implement policies that ensure students have access to the right kind of information at the right time — before they decide where to attend college and especially before they take out loans.
At Navient, we have recommended ways that would help families make more informed decisions about financing their college education:
- Offer a degree-based financial aid package. We should better educate students and their families about the total cost to complete their degree — not just how to pay this semester’s bill. Students should also be able to assess the likely economic benefits of their chosen field before they decide whether and how much to borrow.
- Provide clearer loan disclosures. Students should receive easy to understand Truth in Lending disclosures about the full cost of their federal student loans and estimated monthly payment amount, just as is required for other consumer loan types including mortgages, auto loans and private student loans.
- Improve loan counseling. The government already gathers a great deal of information from students and their parents through the financial aid application process — information that could be used to customize loan counseling.
We owe it to our students to provide better information upfront to make a financially informed college decision.
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