Bipartisan agreement on need for better information about college costs

Paying for college is one of the biggest financial decisions that many Americans will face. But the world of financial aid is complex and confusing, and filling out the FAFSA is only the first step. Even after receiving an acceptance letter and financial aid offer and spending time on a school’s website, too many students and families are still left unsure of how much it actually costs to attend school and how best to pay for it. And with a lack of standardized terminology, it can be difficult or impossible to accurately compare costs and aid across different colleges. That’s why a bipartisan group of lawmakers have introduced a slate of bills to improve consumer information about financial aid and college costs.

It’s important to note that while these proposals are important, better information will not make college more affordable or put more money in students’ pockets. Even if a student has the clearest possible information about costs, they still need to find a way to cover them. And with rising college costs outpacing income growth, more students than ever need financial aid — including loans — to pay for college.

But alongside our fight to get big new investments in higher education — including doubling the maximum Pell Grant award and creating a new partnership between states and the federal government to restore funding for public colleges — we must do a much better job of equipping students and families to make informed decisions about paying for college.

Step one: make sure that financial aid offers make sense. According to a growing body of research, financial aid offers — on the basis of which students and families make major life decisions — are too often unclear, inconsistent, and misleading. Colleges are not required to use consistent terminology or a standardized format, making it difficult to impossible for students to make apples-to-apples comparisons about what they are being asked to pay and their options to cover those costs.

Our analysis of nearly 200 financial aid offers found that only half of them outlined the full cost of attendance, broken down by category. Some such offers did not list cost figures at all, while others listed only tuition and fees or other costs paid directly to the college and omitted key information about the total cost of attending school. In addition to textbooks and other supplies, basic needs expenses such as housing, food, transportation, and childcare are a major part of the cost of attending college and should be clearly communicated to students.

A bipartisan bill would require key improvements to aid offers that would address these problems. The Understanding the True Cost of College Act, recently re-introduced by Sens. Chuck Grassley (R-Iowa), Tina Smith (D-Minn.), and Joni Ernst (R-Iowa), would guarantee that students receive clear and comparable cost and financial aid information from every college to which they are admitted.

Sens. Grassley, Smith, and Ernst also introduced a bill to improve another critical tool for estimating college costs: net price calculators. The “net price” of a school is the actual cost a student pays to attend. Unlike the sticker price of a school, the net price is an individualized number that accounts for grant and scholarship aid to estimate what a student would actually need to pay (either out of pocket or with loans). By looking at net price rather than sticker price, many students may discover that schools they thought were too expensive may be in reach once they take grants and other aid into account.

Because different states and schools offer different grants and scholarships, comparing colleges’ net price is also the only way to get an apples-to-apples comparison of actual expected college costs. And while these online tools, called net price calculators, have the potential to be a big help, our research has found that many of them are hard to find, use, and compare. The Net Price Calculator Improvement Act would make these tools easier to use and would create a central website to allow students and families to compare individualized estimates of their net price across multiple colleges at one time.

Once students receive their aid offer and understand their net price, they then have to decide how to cover the bill. For most students, this can mean taking out loans. A third bill from Sens. Grassley, Smith, and Ernst, the Know Before You Owe Federal Student Loan Act, would provide students with key new information about borrowing, including an estimate of their total expected student loan debt at graduation and an expected debt-to income ratio based on their current program of study. Combined with an explanation about how extending time to graduation can increase costs, this enhanced and more frequent counseling may reduce students’ uncertainty about their debt burden as they progress through college, as well as their expected financial circumstances at graduation.

Alongside major new investments to make college more affordable and reduce students’ need to borrow, these bipartisan bills would give students and families access to better information as they decide where to attend college and how to pay for it. This will give more students the opportunity to enjoy the life-changing benefits that a college degree can bring.

Michele Streeter is a senior policy analyst at the Institute for College Access & Success.