Financial Aid Letters: Why they're so confusing, and how to read them

The cost of college and mounting student loan debt have dominated headlines for years. There's been publicly available data on exactly what is confusing to students and the damage it causes since 2018. It seems like an easy step in the right direction to redesign letters. So why hasn't higher education adapted?

Previous coverage has highlighted the lack of federal regulations as the biggest hindrance to transparent financial aid offers for college students. While efforts have been made by New America, the Department of Education, and policymakers to encourage universities to clarify their letters, there's only so much standardization that can happen without federal regulations. 

Multiple bills were introduced to address these issues, but little progress has been made in recent years as other policies had the spotlight. Essentially, it's less of a priority compared to other issues in today's political landscape, Nguyen said. 

Updated recommendations from the Department of Education came out last year on how to craft a clear financial aid offer, but similar guidelines were provided in 2012 by the Obama administration that don't seem to have made a significant impact. Around 500 colleges and universities voluntarily agreed to adopt the original guidelines released in 2012, but that only amounts to 10% of colleges.

"That uAspire study that happened in 2018, I think that really did shed important light on the variability, and I think that there has been some improvement in letters," Trone said. "But that tends to be more on an institution by institution basis and not an across-the-board kind of change."

So what is stopping schools from making their financial aid offers easier to understand? The reasons can vary, Nguyen said. "Sometimes it's that the software they used to make the offers just allows a certain number of words. So they maybe cannot spell the loan out, or cannot spell the full name, like the unsubsidized direct loan, for example."

Schools also struggle to standardize because of different needs in their letter format, such as accommodating for semesters vs. quarters. Schools also may not realize their financial aid offers are confusing students. However, it's impossible to ignore the fact that enrollment numbers are a big focus for universities, especially with enrollment down since the start of the COVID pandemic.

"We think another reason is it can be an enrollment management tactic that the schools use," Nguyen said. Including loan and gift aid in one sum means schools are able to entice students by saying their financial need is fully met for the year, without drawing attention to the fact that that includes student loan debt.

The most important thing students can do to advocate for themselves? Make sure they understand their offers and take advantage of any chance to ask questions.

"Make sure you go through line by line, everything that is in that letter," Carole Trone from the Fair Opportunity Project said. "What I recommend that you do is you go through it and if you're funding your education with your parents, you should all sit down if you can, and write down what you think each line item means."

This is also a good time to write down any concerns or questions you have to ask your financial aid office. How will the financial aid package change next year? Do the scholarships have requirements you should know about? What do you need to do to get a work-study job?

Once you've outlined your questions, contact your aid office to make sure you're clear on your offer. It's also important to take time to weigh your options and think about the next four years.

"Make sure you actually look at what the cost of attendance is and understand essentially what you are going to need to cover," Trone said. "In most cases the aid you get will not fully cover all of your costs. So you need to map that out because it is an investment."

So what can students who don't get enough aid do to help bridge the gap? There are a few options available.

Aside from work-study funding, working part-time at a higher-paying job, and hunting for other scholarships, students may also be able to negotiate with their school for a better offer.

"You can appeal your offer. If your circumstances have changed, if COVID put your parents out of work, if you had a catastrophic medical expense, let the college know. They will work with you," Trone said. "Not enough people know that it's an offer."

You can also ask your top choice school if they will match or compete with another college’s more generous aid offer.

Trone recommends using a free resource called Swift Student, which offers financial aid appeal letter templates. Students can find resources to appeal their aid, find out how to write an appeal, and ask for additional aid for disability-related expenses, a new laptop, childcare costs, and even to exclude parental income in the financial aid calculation.

While financial aid deadlines are important to know, what happens if you miss one? You should always apply for aid, even if you think it's too late. While some aid sources, such as state grants or school scholarships, may have limited funds, it's rarely too late for most other funding, said financial aid expert and higher education consultant Matt Newlin. You can fill out the FAFSA and get aid up until June 30th of the year you need aid for.

If you're scrambling to get money to help pay for school, see if there's an opportunity to file an appeal.

"More and more undergraduates are skewing older and so underrepresented students, students who are parents, nontraditional students, a lot of them will have those unusual or atypical financial expenses at home," Newlin said.

Newlin's other piece of advice? Look for scholarships.

"Make sure you're searching online for every scholarship that's available. There are scholarship funds out there for non-traditional students, students who are over a certain age or who are coming back to school to finish a degree or to change careers," Newlin said. "There are scholarships for different racial and ethnic populations, for students of color, for first-generation students, and so really just get out there and explore scholarships that you can utilize at your institutions."