Susan Romano read her son Zach's financial-aid letter from Drexel University, and her eyes jumped to the line highlighted in yellow: “$13,442 expected payment” for the first year at the $63,000-a-year school.
“At first, I thought it was great,” said Romano, 48, an insurance claims representative from Huntington, Pennsylvania. “The more I read it over and over, the worse it got.”
It turned out the college's “offered financial aid” included $42,000 in loans to be taken out by the family, including a “suggested” $36,178 in parental borrowing or private loans.
“A loan to me is not financial aid,” Romano said. “It is money I have to pay.”
As many high school seniors face a May 1 deadline to decide where to go to college, families are struggling to understand financial-aid letters, which can be murky and confusing. While the federal government requires banks and mortgage companies to disclose interest rates and total payments on loans, financial- aid letters for college -- which can cost as much as $240,000 for four years -- are unclear about how much families will have to pay.
“You have to be savvy enough to know the fine print exists, and then you have to be eagled-eye enough to find it hidden in the letters and on websites,” said Debbie Greenberg, a counselor with College Bound St. Louis, which coaches low- income students about admissions and financial aid. “You also have to have access to a computer.”
Difficult to Compare
The Education Department, consumer groups and guidance counselors are pushing for a standard format for award letters to make them less confusing. The Education Department is working to complete a model financial-aid award letter before the start of the next school year, Justin Hamilton, a spokesman, said in a telephone interview. Only Congress has the power to make it mandatory, he said.
“Our hope is that institutions will see the wisdom and benefit of moving towards a common form,” Hamilton said. “Allowing students to comparison shop with a common letter would be a big step in that direction.”
College financial-aid officers oppose the move, saying it would give them less room to negotiate. It isn't uncommon for colleges to try and match offers from peer institutions, if the families present a package with more money, said Darby McHugh, the college counselor at Bronx High School of Science, a public school in New York.
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The National Association of Student Financial Aid Administrators in Washington went to Capitol Hill in March to lobby against standard documents. While the group isn't opposed to requiring schools to use the same terms, its members prefer the flexibility to design their own letters, Megan McClean, NASFAA's director of policy and federal relations, said in an interview.
“It's not an issue of trying to confuse students or leave things out,” McClean said. “We are always in favor of students and families having clear and accurate information.”
Drexel, a private school in Philadelphia, includes federally backed and private loans in letters about financial aid so families have a complete view of available resources, Joan McDonald, senior vice president for enrollment management, said in an e-mail.
The format for aid packages varies by school, making them difficult to compare, and some students have little more than a month to decide. Loans and grants offered by the federal government are lumped together with the school's scholarships, and the statements often don't include information on interest rates.
‘Manipulative and Deceptive'
The documents colleges send can be “manipulative and deceptive” because the true costs are hidden, said Greenberg, who has been a counselor for 15 years.
One of Greenberg's students, Salenia Shaw, received a letter from Bradley University in Peoria, Illinois, in December announcing $40,000 in scholarships over four years. A letter in March said she would receive $29,050 in “financial assistance” for next year and the balance in “direct costs” would be $7,914.
She was directed to a website that showed “educational expenses” of $36,964 for tuition, fees and room and board. Greenberg added in $3,300 -- an amount mentioned lower on the screen about expenses that aren't charged by the university -- for a total of $40,264. The bottom line: Shaw and her mother, a photographer without a steady job, would have to take out $17,000 in loans to make up the difference.
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Shaw's letter ends with a section called “Even More Choices,” a euphemism for financing the balance on a credit card. The letter says Bradley provides this option “for maximum convenience.”
Bradley hasn't heard complaints from families about the clarity of its letters, David L. Pardieck, director of financial assistance, said in interview.
“Families tell us they appreciate the simplicity,” Pardieck said.
Shaw said her mother has poor credit and wouldn't qualify for a loan. The burden would fall to Shaw, 17, who wants to become a veterinarian.
“I'm going to have to be independent and bust my butt working a lot,” said Shaw, who is weighing other options and will decide by May 1.
Tuition and fees to attend a public, four-year college have almost tripled since the 1995-1996 academic year and have more than doubled for a private-school education, according to data from the College Board, a New York-based nonprofit group whose members include universities. Educational-loan debt has ballooned to $1 trillion, surpassing the amount owed on credit cards in the U.S., according to the preliminary findings by the Consumer Financial Protection Bureau.
Comparing Options
The agency introduced a website this month that helps students compare financial-aid options at different schools.
“Clear financial-aid information with estimates for total debt and monthly payment after graduation would help them make decisions,” Rohit Chopra, CFPB's student-loan ombudsman, said in an e-mail.
That kind of information would be helpful to Daniel Jamrozik, 18, the top-ranked student at his high school near St. Louis, who needed help from a coach at College Bound to interpret his aid award letters.
Loans Add Up
A letter from the public Missouri University of Science and Technology presented a 10-line breakdown with a boxed amount of $22,536 that matched the school's total cost to attend. The package, though, required Jamrozik and his parents, immigrants from Poland, to take out $12,586 in loans. His father is a contractor and his mother juggles several jobs, including as a nursing-home aide. Jamrozik would also have to find a work-study job for $2,500.
A letter from Butler University, a private college in Indianapolis, initially appeared to offer more: the $28,100 amount highlighted in a box. After calculations, he and his coach determined the gap was bigger at Butler. Jamrozik and his parents would need to take out $28,000 in loans, more than double the amount for the state school.
“It's certainly not our intention for them to be confusing,” Melissa Smurdon, director of financial aid at Butler, said in an interview. “There is a significant amount of information that needs to be conveyed.”
Jamrozik equated the letters to a scavenger hunt.
“You're just going to be suffering for an eternity to pay off the debt,” he said.
--Bloomberg News--
