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Gillian Berman
“It’s become a really chaotic mess to navigate” because there’s no basic standard college to follow
Millions of students across the country need to decide where they want to go to college by Monday, May 1st, but have all the financial information they need to make an informed choice. can be difficult to do.
That was one tip MarketWatch took from a discussion with Rachel Fishman, acting director of higher education programs at Barron’s Live’s New America, about deciphering financial aid offers. Ideally, students will learn from these communications how much financial aid they will receive at a particular college and how that will affect how much they will need to borrow or how much they will need to pay to attend. I can.
In practice, however, the offers from these universities can be opaque, as revealed by research co-authored by Fishman and by the Government Accountability Office. In fact, Fishman told his MarketWatch that these communications from universities can be very confusing, and that his GAO’s are trained to understand how to evaluate these offers to do research. Investigators said they were “frustrated with the process.”
“If you’re scratching your head and the GAO is scratching your head, it’s not like you have to navigate this well,” he said of the confusion surrounding the provision of financial aid. What’s really happening shows that there is no minimum standard governing these communications, it becomes a really confusing mess to navigate and get a quick answer as to how much this will cost is difficult.”
Students receive these communications after applying to the college and completing the Free Application for Federal Student Aid, also known as FAFSA, the government’s financial aid form. Some colleges may also require students to complete a CSS Profile, a form developed by the College Board asking more detailed questions, before determining eligibility for financial aid.
FAFSA requires families to report income and certain assets, such as college savings plans and brokerage accounts. Retirement benefits and family housing are not part of the financial assistance calculation under FAFSA. Students eligible for Pell grants, which the federal government provides low-income students to help pay for college, are the same no matter which college they attend. However, a student’s eligibility for other types of federal aid, such as vocational studies and subsidized loans, is based on a combination of economic situation and college costs.
Schools also use the information provided in the FAFSA to determine how much money the school will provide to students to help pay for college. Universities using CSS profiles may consider more assets, such as the value of a family home, when determining the amount of aid to give to a student.
According to the GAO, ideal financial aid offers include those that are paid directly to the university, such as tuition and fees, and all costs associated with attending school, including indirect costs such as meals and transportation. Gifts and scholarship assistance, money that the student does not have to repay, must be clearly deducted from the total cost of attendance to provide the student with a definite net value. This is the amount a student must pay out-of-pocket through savings, loans, work study, or other sources of funding to attend college.
However, in last year’s report, the GAO found that universities often omit this information or present it in an obscure format. According to the report, none of the universities followed all GAO best practices when presenting this information. Government watchdogs also found that 91% of universities didn’t calculate net prices correctly.
A Fishman study published in 2018 also found that many of the terms colleges use in these offers can confuse students and families. I used the example of how to refer to federally unsubsidized direct loans (which are available to all students and accrue interest while the student is in college). this dynamics. Of the 455 colleges that offered subsidized direct loans to their students as part of their financial aid package, 136 listed it in different ways, and 24 schools didn’t even use the word loan to describe it. did not.
“When you think about comparing financial aid offers between different institutions and different colleges and universities, if you can’t even stand on the same page with one loan available to everyone, it’s really hard to do. It will be difficult.
Cost information omitted
In both the Fishman survey and the GAO, the majority of colleges (more than one-third of colleges in the GAO report and 22% in the GAO report for the Fishman survey) provided information on college costs. It turns out not. Offers.
“Imagine getting a $20,000 scholarship and being really happy to have received this $20,000 scholarship, but there’s no figure to subtract from that,” she said. After doing research, students may discover that $20,000 only covers about a third of the school’s total costs, Fishman extends the hypothesis.
“Maybe the scholarship wasn’t as great as you first thought, and you might be wondering why the agency didn’t put this information on their financial aid offer. Broken?” ‘ she said.
Fishman said during the discussion that communications from these universities are confusing for a variety of reasons. For one thing, some schools are under-resourced and may not have the staff and time to dedicate themselves to making their offers easy for students to understand. Additionally, schools often use software programs to generate these letters, but they may not be paying attention to what the programs spew out.
But Fishman said one of the main drivers of such behavior is the university’s attempt to convince students to attend.
“Most educational institutions want you to come, they want your money, and they want you to enroll, so they want to make it look as affordable as possible to make that happen. “The incentives are out of alignment. The best interests of the institution in this scenario where the institution hands you the communication is your financial best interest as a student.” does not necessarily match.”
Fishman provided some tips on how to ensure students and families can decipher these financial aid offers and understand the best financial options in this uncertain environment.
Create a spreadsheet.
Universities don’t provide financial aid information in a standardized format, so Fishman suggests creating your own spreadsheet to compare university offerings side-by-side. Using Excel or her Google Sheets is still part of Fishman’s standard advice on the topic, “It makes me really sad,” she said. And that’s what I still recommend. ”
Collect all costs.
The first part of the spreadsheet should list all expenses such as tuition, miscellaneous expenses, housing, food, books, miscellaneous expenses such as transportation. Universities are required to estimate these costs, but have discretion as to how to do so, and these estimates can be difficult to find on their websites.
Gift Assistance Separate from Loans:
In some cases, universities do not distinguish between loans that students must repay and grants or scholarships offered by financial aid. So when creating your spreadsheet, “extract grants and scholarships first,” says Fishman. This will give you an idea of how much free assistance you are getting in paying for college.
Fishman also advised students to make sure they understood the terms of the scholarships offered. For example, some scholarships require students to maintain a certain grade point average. Others are only available in the student’s first year.
Additionally, find out if the college you are considering engages in a practice called scholarship replacement. Reduce the amount of scholarship aid.
“It sounds really bad and feels bad,” Fishman said. “Not all institutions do it and they can do it too. That shouldn’t stop you from going out to get these scholarships,” she said, but You should know if your educational institution does so.
Subtract the gift aid from each school’s cost of attendance to compare net costs.
Students can use savings, study funds, and loans provided in financial aid packages, among other resources, to cover their net costs. If students plan to use loans to pay for their studies, Fishman suggested exhausting their federal student loan eligibility first before considering other financing options.
Fishman said parents should carefully consider whether to take advantage of the Parents Plus loans offered by the federal government, which parents can use to pay for their children’s education. loan. She added that private student loans offer little protection and often charge higher interest rates than federal student loans.
follow up:
Family-provided data that the Financial Assistance Office uses to determine eligibility for aid is typically about two years old, so students may not know, for example, if a parent loses their job or if their family is in good health. It is necessary to inform the person in charge of changes in the economic situation, such as when the above problem occurs. college they want to go to.
(Read more) Dow Jones Newswires
04-29-23 1106ET
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