Officials target college financial aid letters

Financial aid letters don't always distinguish between grants and loans.

Financial aid award letters can be misleading.

In one common practice, for example, colleges highlight the total “out of pocket” cost for attending. The figure is intended to give students an estimate of how much they’d have to pay after outright awards, such as grants and scholarships are factored in.

But in calculating the “out of pocket” figure, some schools also reduce the total bill by the amount students would have to borrow even though loans accrue interest and ultimately push up a student’s costs.

The practices are troubling because families often use these aid letters to help determine which school to attend. The lack of clarity has also played a role in driving up the debt loads shouldered by graduates to record levels, federal officials say.

On Tuesday, the Consumer Financial Protection Bureau and the Department of Education announced a plan to simplify the aid letters so that families can assess a school’s true cost and make comparisons more easily.

Officials are asking for feedback on a draft of the form, available at

As it stands, the draft makes clear distinctions between scholarships and loans; it also includes key figures such as the estimated monthly payment and total debt upon graduation.

“The stakes have never been higher for students and their families to clearly understand the costs and risks of student loans,” said Raj Date, an official with the Consumer Financial Protection Bureau. “Having a simple, one-page financial aid shopping sheet would help students compare offers and choose the one that’s right for them.”

A final version of the form, expected in coming months, could also include the school’s graduation and loan defaults rates.

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