Financial aid offers at 9 out of 10 US colleges deceptive: report

Although the rising cost of bachelor’s degrees in the US is often blamed for the record $1.6 trillion in student debt owed by students, the problems can start before anyone even enrolls in college. The reason: According to a new government report, 9 out of 10 schools fail to provide Americans with an accurate estimate of the cost of attendance in their financial aid offers.

This failure makes it difficult for students to compare competing financial aid offers, and may lead to underestimation of their actual costs. This could prompt them to take on more debt than initially expected, cut back on essential expenses like food, or give up on their education, according to a watchdog agency, the US Government Accountability Office.

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An analysis of financial aid offers from 176 colleges across the country underscores the lack of oversight of what is often one of the biggest financial decisions in a person’s life. Unlike other financial products – mortgages, auto loans and the like – there is no federal law that states what colleges must disclose to students and their families when awarding financial aid.

As a result, colleges often omit costs, underestimate expenses and even describe student loans as “prizes”.

The GAO report states, “The total cost of attendance – the ‘sticker price’ of a college – is essential in helping students and families determine whether a college is affordable.” “Students may not use their financial aid offer to assess the value of any aid awarded in relation to the cost of college if it does not cover or is too low to cover the total cost of attendance.”

The agency’s findings were called “troubling” by Senator Chuck Grassley, a Republican from Iowa, who said he is leading a renewed push for new bipartisan legislation called the “Understanding the True Cost of College Act”. This would require higher education institutions to use a uniform financial aid proposal form.

Senator Tina Smith, a Democrat from Minnesota and one of the bill’s co-sponsors, said in a statement, “This GAO report is a huge, red flag sign that students are systematically being misled about the total cost of college.” There is danger.”

The GAO advised Congress to pass legislation requiring colleges to provide “clear and standardized information that follows best practices” in their financial aid offers.

no way to comparison shop

The GAO said that students often receive offers from multiple colleges during their application process, but the lack of standards for financial aid offers can make it difficult for them to “make informed financial decisions about how much they will need to borrow.” .

That, in turn, complicates a student’s ability to compare competing offers from different schools. For example, 4 out of 10 colleges do not include net worth in their financial aid offers, which refers to the actual amount a student would need to pay to attend the institution—not just tuition, but books. Also indirect costs like transportation, and so on. Off-campus housing and meals, the analysis found.

The GAO found that half of colleges underestimate their net worth by excluding certain expenses and including loans to be repaid as part of a financial aid package.

“Overall, 46% of colleges do not provide information about the cost of housing and meals,” the report said. “Additionally, many colleges do not list major indirect costs in their financial aid proposals: 42% do not provide information on books and supplies and 53% do not provide information on other miscellaneous indirect costs such as transportation.” “

Loans Misleadingly Described as “Rewards”

Other deceptive tactics used by many schools include describing loans and work-study programs as “rewards,” even though the former are financial products that must eventually be repaid and the latter represent labor that the student must perform. Who should do According to the GAO, about 76% of colleges use the word “award” in their financial aid letters.

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“Students should be aware that loans and work-study are not ‘awards’ as they generally must be repaid or earned through employment, respectively,” the report said.

The report states that the underestimation of the true cost of attendance may be due to the colleges’ desire to “appear more affordable than their peers”. While this may benefit the institution by increasing student recruitment, it harms the students and their families. The study noted that underestimating costs “can mislead students into making college seem less expensive than it actually is.”

The GAO continued: “The college administrators we spoke with said that minor unexpected outlays for indirect costs, such as medical expenses or for transportation, can lead students to experience a financial crisis that negatively impacts their ability to succeed and complete college.”

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