By Todd Weaver
How much of your financial aid award is “gift aid” versus “self-help?” Does it matter? How can you tell a good award from a bad one?
These are just a few of the many questions that come to mind as high school seniors receive their award letters. In an effort to alleviate some of this confusion, more than 600 institutions have adopted the Department of Education and Consumer Finance Protection Board’s Financial Aid Shopping Sheet, which is helping families understand and compare the available aid at the colleges they’ve been accepted to.
The Shopping Sheet subtracts gift aid from the estimated cost of attendance of a college in order to give families an understanding of their net cost. It then lists amounts of various self-help options so that a family can see what the student will have access to in terms of loans and work-study funding.
While this layout is a good start, there are a few areas that need improvement. Be sure to take notice of these three elements on the Shopping Sheet, and how they may not be giving you the information you’re looking for:
The Graduation Rate
The Shopping Sheet provides the rate of students who graduate in six years—which is going to be higher than the rate of students who graduate in four years, making this number look somewhat inflated. It is more important for students to know the four-year graduation rate of an institution. Many forms of financial aid are no longer offered to students after their fourth year, which means that the net price for that additional year or two of college will be more expensive than the net price indicated on the Shopping Sheet.
The Loan Default Rate
The loan default rate listed on the Financial Aid Shopping Sheet indicates the percentage of borrowers who are entering the repayment stage and are defaulting on their loans. However, the number only represents the default rate for federal debt. It does not take the default rates on private loans or parental loans into consideration.
In this section of the Shopping Sheet, you’ll see that colleges list the median amount students borrow in Federal loans for undergraduate study, along with the loan payment amount over the course of 10 years. This number takes students of all financial standings who have borrowed loans into account—even those who can afford to pay most of their college costs by other means. This causes the median borrowing amount to appear much lower than it typically is for lower and middle income families.
And then there is the big issue—the Shopping Sheet only shows a family what the first year of college might cost. It does not discuss the costs of college during years 2, 3, 4, or more. Sometimes colleges may change the way the financial aid is distributed over the years.
In some cases, as a student progresses through college, they may become eligible for more federal Direct loan disbursements, and may see their gift aid reduced as a result. Gradually increased debt-based aid is not something you can anticipate when you receive your award letter as a high school senior, and is also not a good way to help financially strapped students after graduation.
So take the Shopping Sheet for what it’s worth—a conversation starter. Dig deep and read the fine print on each award letter you receive before making a commitment to a college by May 1.
Financial Aid College Shopping Sheet
Todd Weaver, Senior Associate with Strategies for College, Inc. is an independent college consultant specializing in helping families integrate their ability to pay for college with the student’s admissibility to find the right “fit.” To learn more, check out his blog at College Search Game Plan or follow @CollegeGamePlan on Twitter.