Government Regulations that Help Families Shop Smarter for Colleges

The spring is “decision season”: the time when college-bound high school seniors learn whether they’ve been accepted to colleges and decide where they will go. It’s also the time when - in theory - they learn how much college will cost them. We say “in theory” because this part of the process is notoriously difficult!

Despite where you go to college being one of the largest financial decisions you’re likely to make in your life, students and families are often given far less pricing and cost information than they’d like - at every step of the process. Imagine buying a house without knowing what your mortgage payments will be for the next 20 or 30 years. That’s what ‘buying college’ is currently like.

In recent years many organizations in the nonprofit, policy, and government sectors have recognized this challenge and looked for ways to help. Here are the key regulations that attempt to do so.

Net Price Calculators

The first is the requirement that colleges and universities provide ”net price calculators” on their websites. These calculators take a potential student’s information and provide an estimate of the “net price” for a student to attend the college per year. This net price should not include loans and the estimate should be current every year.

There are different types of net price calculators - some take more information than others. If a net price calculator requires more information, it may be more accurate. But it also may be more time-consuming to complete. In addition, there are net price calculators that do not include merit-based aid. For many students who do not qualify for much need-based aid, merit-based aid will be a key way to reduce the cost of college. Therefore net price calculators without merit aid estimates will not be very helpful in their planning.

Sometimes families find that net price calculators are buggy or out of date, hidden on the college websites, or not easy to use - in spite of the government guidance and requirements. Unfortunately there is minimal enforcement of this aspect of the Higher Education Act. 

Despite these weaknesses, the introduction of net price calculators is a significant step in increasing price transparency for students. We recommend that you always use net price calculators, but recognize that they are just one part of the picture as their accuracy will vary.

The College Financing Plan, or Shopping Sheet

Once accepted, a student will receive a “financial aid letter,” sometimes called an “award letter” or “financial aid award letter,” that tells them whether they received any financial or merit aid. Sometimes this is not a letter, but found in an application portal or in an email. Occasionally a student might receive a few different forms of communication - for example, a letter informing them that they received a certain scholarship and then a separate sheet summarizing other forms of aid.

Informing students of their aid is a standard practice for colleges - but again, comes with pitfalls. There is no regulation governing aid letters and there is broad inconsistency across them. Colleges have an interest in making their offers look more appealing in order to persuade students to enroll once they are accepted, which can lead to misleading framing.

A prominent study by the New America Foundation, Decoding the Cost of College, reviewed thousands of aid letters and found that they had “confusing jargon,” and often failed to identify or calculate the true cost to students (among other issues).

One government answer to this problem has been to provide (but not require) something called the College Financing Plan (formerly called the Financial Aid Shopping Sheet). This is a standard template that colleges are encouraged to use when providing information on a student’s financial aid package.

If your colleges use the College Financing Plan, good news! You will receive a full set of details about your actual costs to attend that college. The Plan also differentiates “free money” from loans and work study.

The bad news? Not every college uses the College Financial Plan.The government used to maintain a list of the ones that do, but no longer does.

The College Transparency Act and Higher Education Act

Other federal government policies and laws can improve the financial aid experience for students and families and help them make decisions that will improve their college ROI. One example is the College Transparency Act, a bi-partisan bill sponsored by Sens. Bill Cassidy (R-LA) and Elizabeth Warren (D-MA) that would make more data on educational outcomes available to the public.

The Higher Education Act was passed in 1965 in order to increase funding to colleges and universities, in part supporting more financial aid for college-going students. The Act is periodically “reauthorized,” meaning its provisions are updated to make it relevant for modern times. Many policymakers feel the next reauthorization is overdue (the last one was over 10 years ago). The National Association of Student Financial Aid Administrators is advocating for key financial aid improvements in the Act, and the current presidential administration issued a statement on its priorities for the next version of the Act in March of 2019 which included measures to limit student loan debt and provide repayment help for borrowers.

While the average family is not closely attuned to higher education policy, it’s valuable for students and their families to be aware of government initiatives to help you plan and pay for college. The more those tools are used and asked for, the better!