How Financial Aid Letters Often Leave Students Confused and Misinformed

Washington, DC, United States (ProPublica) – by Marian Wang

The financial aid award letters that colleges send to prospective students can be confusing: Many mix grants, scholarships and loans all under the heading of “Award,” “Financial Assistance,” or “Offered Financial Aid.” Some schools also suggest loans in amounts that families can’t afford.

Take Parent Plus loans, a federal program that allows families to take out as much as they need, after other aid is applied, to pay for their children’s college costs. As we recently reported with the Chronicle of Higher Education, Plus loans are remarkably easy to get. With minimal underwriting and no assessment of whether parents can actually afford the loans, families can end up overburdened by debt.

Colleges often exacerbate things when their letters lay out, or “package in,” large Plus loans to cover unmet need when student aid falls short. Just like the government, many colleges recommend loans without regard to family income or ability to repay.

The practice can leave students feeling misled. As we reported, Agostinha Depina, a’-year-old college student, said that one of her award letters — from her top choice, St. John’s University in New York — “made it seem like they gave me a lot of money.”

After consulting a counselor, she realized that “it was more loans in the financial-aid package than scholarship money.” St. John’s did not return our request for comment.

“Financial aid award letters need to be more transparent around laying out aid that doesn’t need to be paid back and loans that do,” Education Department spokesman Justin Hamilton said in an email.

The department has laid out what it says is a better option. Earlier this year it created a model award letter , which separates “gift” aid — grants and scholarships from the school or the government — from “loan options.” Parent Plus loans are included in a separate category — “Other options” — with no suggested dollar amount.

– Provided by ProPublica.org

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