College costs should be transparent: Congress should require schools to provide families with the actual price of attending

The financial aid letters that colleges send to families are misleading, even misleading. This makes it nearly impossible for families to know how much they will pay for college, known as the net price of college. This is because federal law does not require colleges to provide families with clear and consistent financial aid information as it does with mortgages or credit cards.

Financial aid for students is no small feat. The fiscal year of the US Department of Education. payment 2021 for student financial aid through grant and loan programs was nearly $112 billion.

This problem is not a recent development.

Twenty five years ago, a 1998 report of a Commission on the Cost of Higher Education created by Congress said that “…most institutions of higher education have allowed a veil of darkness to settle over their financial operations (while) parents are simply interested on what they will have to pay when their kids go to college.” (Full disclosure: I was the executive director of the commission)

a new report from the US General Accountability Office includes an analysis of more than 522 family financial aid offers made between January 2021 and November 2022 from a nationally representative sample of 176 US universities.

These help letters contained information about grants, loans, and work-study options. GAO evaluated the letters against 10 best practices recommended by the US Department of Education in 2019 and a separate 2020 Education and Financial Education Commission.

The GAO found that only 9% of colleges accurately report the out-of-pocket money families will pay to attend, with about 63% of colleges following five or fewer of the top 10 best practices. No university in the sample followed the 10 best practices.

Here are three other key findings:

• Forty-one percent of schools do not list a net price, leaving families to calculate that amount.
• Another 50% understate the net price by excluding significant costs or counting reimbursable federal loans as “financial aid.”
• Nearly a quarter of financial aid offers do not distinguish between grants, which do not require repayment, and loans, which do.

All of this makes college seem more affordable than it is, with disastrous consequences for students.

For example, the US Department of Education. reports that about 20% of student loan borrowers are in default, going at least 270 days without payment. More than a million loans default each year.

Although some borrowers come out of default to bring their loans current, some return to default with the 25% of those who restored their loans to good standing in default again within five years. The effects of this include damaged credit rating, loss of access to other federal programs, employment problems, and default collection fees that increase repayment costs.

The GAO recommends that Congress consider legislation requiring colleges to provide families with financial aid letters that follow the 10 best practices used in their report. The response to the GOA report from advocates and Congress was swift and supportive.

“Students and families need clear and understandable financial aid information…. GAO report…highlights how schools are falling short…”. saying Justin Draeger, president of the National Association of Student Aid Administrators.

TO coalition of 51 student advocacy organizations issued a letter support a bipartisan Senate proposal called Understanding the Real Cost of College Act.

Rep. Virginia Foxx, the new chair of the House Education and Workforce Committee that requested the report, and her colleague, Rep. Lisa McClain. called the action of the schools “…atrocious and unacceptable”.

They introduced the Law of Transparency of University Costs and Student Protection to establish standardized terms and definitions and format requirements for college financial aid letters.

Finally, Richard Cordray, director of operations for Federal Student Aid at the US Department of Education, wrote to the department official answer: “The GAO findings raise serious concerns. (We) support the need for clear, standardized information for students in their college financial aid offers.”

It’s now 25 years since the commission called on institutions to provide consumers with “more useful, accurate, timely, and understandable information about college costs, prices, and the various subsidies that benefit all students.”

The GAO report suggests that little has changed in those 25 years.

Time will tell if Congress finally fixes the problem so families know how much money they will pay for a college education.

Manno is a senior advisor to the Walton Family Foundation’s education program, a former US assistant secretary for education for policy, and a former executive director of the National Commission on the Cost of Higher Education created in 1998 by Congress.