The practices are troubling because families often use these aid letters to help determine which school to attend. The lack of clarity has also played a role in driving up the debt loads shouldered by graduates to record levels, federal officials say.
On Tuesday, the Consumer Financial Protection Bureau and the Department of Education announced a plan to simplify the aid letters so that families can assess a school’s true cost and make comparisons more easily. Officials are asking for feedback on a draft of the form, available at http://tinyurl.com/3ve57mt,
As it stands, the draft makes clear distinctions between scholarships and loans; it also includes key figures such as the estimated monthly payment and total debt upon graduation.
“The stakes have never been higher for students and their families to clearly understand the costs and risks of student loans,’’ said Raj Date, an official with the Consumer Financial Protection Bureau. “Having a simple, one-page financial aid shopping sheet would help students compare offers and choose the one that’s right for them.’’
A final version of the form, expected in coming months, could also include the school’s graduation and loan defaults rates.
The Department of Education was required to develop the model form as part of federal education reforms in 2008. The adoption of the simplified forms would initially be voluntary, but Congress could vote to make it mandatory for schools that receive federal financial aid.
The push to standardize financial aid award letters comes at a time when student loan volumes have reached record levels. The Institute for College Access & Success estimates that two-thirds of graduates have student loans, with an average debt of about $24,000.
One reason for the ballooning debt is that students don’t always realize how much their loans will end up costing them. That’s partly the result of the “jargon-laden financial aid award letters using inconsistent terms and calculations,’’ federal officials said in the release announcing the initiative.
