Simplifying Financial Aid: The Need for Clear Communication

With the FAFSA Simplification Act set to go into effect later this year, there is a pressing need to simplify another area of student aid: the communication of financial aid eligibility. In this blog post, we'll look at the history of U.S. Department of Education (ED) guidance to Institutions of Higher Education (IHEs) over the last decade and where we stand today in simplifying the communication of financial aid eligibility.

In 2008, with the approval of the Higher Education Opportunity Act (HEOA), the Net Price Calculator (NPC) became a requirement for every institution in the country. The goal was to allow current and prospective students, families, and other consumers to estimate an IHE’s net price for individual students. This caused a flurry of activity in the higher education community amongst the institutions striving to comply with the regulation, and vendors eager to offer solutions and services to assist IHEs. Since then, IHEs have been required to publish their NPC prominently on their website to prospective and current students.

In 2012, the Obama Administration issued an Executive Order to establish Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses, and Other Family Members. The administration instructed institutions to provide prospective students, prior to enrollment, who are eligible to receive Federal military and veterans’ educational benefits with a personalized and standardized form. The goal was to help prospective students understand the total cost of the educational program, including tuition and fees, as developed in a manner set forth by the Secretary of Education.

As a response to the executive order, ED quickly developed and released the Shopping Sheet. While the Shopping Sheet was required for institutions serving military students, ED strongly encouraged all institutions to adopt it. So, since 2012, schools had three vehicles for communicating financial aid eligibility information: the NPC, the Shopping Sheet, and the financial aid Award Letter.

To make matters even more confusing, since the Shopping Sheet was first introduced by ED, the guidance stated that “the Shopping Sheet may be used in place of or as a supplemental cover sheet to an institution’s existing financial aid Award Letter”. This led to confusion about the use of the Shopping Sheet in lieu of the Award Letter. The Shopping Sheet does not contain all the core elements of an Award Letter, as recommended by NASFAA, and according to ED, institutions were not allowed to modify the Shopping Sheet. However, ED did provide an option for IHEs to add information that is not included in the Shopping Sheet format using a box at the bottom of the form for supplemental information.

Things remained relatively quiet after that, outside of a couple of updates and clarifications on the NPC and Shopping Sheet. That is until 2019 when several name changes and some updated guidance were announced. On January 16, 2019, ED announced that the Shopping Sheet would be renamed to the College Financing Plan. Several months later, on April 15, 2019, ED released another announcement with recommendations to the Award Letter, including the recommendation to rename the Award Letter to the Financial Aid Offer.

Over the last four years ED implemented only minor changes, until a small announcement earlier this year caught our attention. On March 14, 2023, ED announced it was going to begin a secret shopping initiative to check institutions’ compliance with several items including their representation of the total cost of attendance and the amount of Title IV aid available to students. Secret shoppers will be asked to evaluate a complicated space, assessing whether IHEs have been following all of the guidance and name changes to avoid misrepresenting information to students.

Remember, the NPC is still a regulatory requirement and should be prominently displayed on an IHE’s website. The Shopping Sheet has been renamed to the College Financing Plan. The Award Letter has been renamed the Financial Aid Offer, and ED still encourages schools to use the College Financing Plan in lieu of the Financial Aid Offer, but without modifying the form. Although the NPC, College Financing Plan, and Financial Aid Offer were initially developed to offer students clear financial guidance, the subsequent modifications and ongoing alterations may be having an adverse impact.

To address the complexity surrounding financial aid communication, we need a simplified approach that benefits both students and IHEs. One solution would be for ED to provide updated guidance on how IHEs can use the College Financing Plan as the official Financial Aid Offer, thereby reducing the number of mechanisms for communicating financial aid eligibility from three to two.

Additionally, several measures could improve the situation for students and IHEs:

1.       Requiring IHEs to provide one notification of costs and financial aid eligibility for all students, regardless of their status (prospective, new, continuing, returning). This would replace three communication vehicles (NPC, College Financing Plan, and Financial Aid Offer) with a single solution. Mandating specific elements, formatting, terms, and definitions for the first page and providing guidance for subsequent pages would further enhance the communication process. This would enable information to be more general for prospective students, while allowing for greater individualization as students progress through the financial aid application process.

2.       Creating a single location for comparing schools, as opposed to the current three (College Navigator, College Scorecard, and CFPB Financial Path to Graduation), would simplify the comparison process for students.

3.       Display costs for the full program the student is enrolled in, rather than just the current academic year. This would provide students with a more comprehensive understanding of the costs associated with their degree.

Ultimately, the goal should be to simplify the financial aid communication process for students. We need to move away from the patchwork solutions of the past and work towards a comprehensive approach that makes it easier for students to understand the true cost of attending college. We cannot afford to add further noise to an already complex process.

We welcome your feedback on our suggestions and would love to hear from you. Please feel free to contact us or share your thoughts in the comments wherever this article is shared.