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    Officials target college financial aid letters

    NEW YORK (AP) — 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 http://tinyurl.com/3ve57mt ,

    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.

    The Department of Education was required to develop the model form as part of federal education reforms in 2008. The adoption of the simplified forms would initially be voluntary, but Congress could vote to make it mandatory for schools that receive federal financial aid.

    The push to standardize financial aid award letters comes at a time when student loan volumes have reached record levels. The Institute for College Access & Success estimates that two-thirds of graduates have student loans, with an average debt of about $24,000.

    One reason for the ballooning debt is that students don't always realize how much their loans will end up costing them. That's partly the result of the "jargon-laden financial aid award letters using inconsistent terms and calculations," federal officials said in the release announcing the initiative.

    In testimony at a Department of Education hearing on the matter last month, financial aid expert Mark Kantrowitz noted that college is one of the few major life expenses that do not come with standardized disclosures about costs. That's despite the $16,000 average total for tuition and fees at public schools, according to the College Board.

    Kantrowitz, who publishes FinAid.org, noted that the financial aid letters don't always distinguish between grants and loans and often don't include basic information on loan terms, such as interest rates.

    Yet if a student took out $24,000 in student loans, the interest charges alone would add up to $9,100 if repaid in 10 years. That's assuming the favorable interest rate of 6.8 percent that federal student loans carry; interest rates on private loans can be higher.

    Making matters worse, critics say schools play an ambiguous role in pushing student loans.

    "The first financial adviser that a student runs into is a financial aid officer at the college," said Anthony Ogorek, a financial adviser in Williamsville, N.Y. "Students needs to understand that these officers don't have a fiduciary responsibility to them."

    Families have also been conditioned to believe that a college education is an investment that will pay for itself, Ogorek said. As a result students often take on huge debt loads without questioning whether it makes sense financially. With many graduates now struggling to find work, the risk of taking on so much debt is becoming all too clear.

    And unlike other types of debt, student loans can't be discharged in bankruptcy; borrowers who fail to pay can have their wages garnished.

    The plan to simplify financial aid forms is modeled after the approach that the Consumer Financial Protection Bureau took in revamping mortgage disclosures.

    Earlier this year, the agency began its "Know Before You Owe" project to simplify the paperwork borrowers receive when applying for a mortgage. Critics say improved disclosures could have helped prevent many of the past problems surrounding the subprime mortgage crisis.

     

    25 comments

    • Dee  •  7 mths ago
      The aid letters are not that difficult to understand. You have to actually read them. If part of the package says loans, you have to pay that back. If it says grant or scholarship, you do not. If people can't even figure that much out, they are really not college material.
    • Goldman's Sach  •  Carlsbad, United States  •  7 mths ago
      In the 1980's I went to engineering school at a big ten university - tuition was $640 per semester. Now tuition at a fake on line school costs ten or 20 times that - this just goes to show that our country really doesn't care if it's citizens are educated anymore. In fact the governement/rich want us as dumb as possible . . .
      • Signers of Declaration of ... 7 mths ago
        As long as the Government want to give loans to students there is enormous corruption at schools to get more money!
    • LindsayTheRepublican  •  7 mths ago
      Passion in ones interest is more powerful then a college degree
    • MyronofArabia  •  Vientiane, Laos  •  7 mths ago
      more students loans!! WE are dangerously low on Theater Arts majors and Gender Studies minors.
    • it's  •  Doylestown, United States  •  7 mths ago
      All that, and King OBLAMER keeps pushing kids to go tens of thousands of dollars in debt for an education that most will find toally useless, and no prospect of being able to pay off their STUPID (student) loans on time, thus setting them even deeper in debt, just like King OBLAMER has done to the government.
    • Mistienne  •  7 mths ago
      I do not think even a mathematics major, economist, or accounting major could figure out the actual costs of school these days. Colleges routinely add 25 percent more to tuition every couple of years. They do not lock in tuition rates. It is never what you expect it to be.
      • ! 7 mths ago
        ....except that it is typically in the news at least one year before the tuition hikes go into effect. Yes, college does cost more than it should, but to suggest that you can't have a solid estimate of a two-year cost is the rant of lazy person who just doesn't bother to read and/or do basic math.
    • .  •  7 mths ago
      It costs OVER $15,000 a year to attend state college in NY,CT and Massachusetts. These three areas also have the highest cost of living with rent averaging $1,000 a month for a single person. Middle and working class people cannot get most grant money, that goes exclusively to poor minorities so how are you supposed to afford school and your rent without putting yourself into an enormous debt hole? With the lack of jobs out there this a recipe for disaster. Tuition needs to be lowered. And this business of buying books at grossly inflated prices needs to be done away with. A text book should cost $10 not $300.
    • prefer a horse!  •  7 mths ago
      It is obvious that it does NOT include the more than 1600 federal rules, regulations, and laws pertaining to student loans that are "included by reference."
    • meh  •  7 mths ago
      This is exactly the sort of regulation that Conservatives and Republicans decry as job killing.

      As far as they're concerned, it's entirely OK for corporations, colleges and non-government entities to lie in order to make money, especially off the government.
    • Bear  •  Ann Arbor, United States  •  7 mths ago
      My financial award letter is one page, clearly stating loans I am being offered. Yes, I do have to go and read the documents regarding my loans because they do not appear on the letter, but it doesn't take long to do this. So far, all my student loans are from the government, except one. I'm already in a program, that, while still in college allows me to make payments on my private loan. It is the responsibility of the student (and parent, if you are lucky enough to have a parent helping to pay your way) to read the letter and ask intelligent questions.

      In addition to limiting how much money goes to athletes, in order to make sure that all students get a fair share of financial aid from the university, universities should also not be allowed to increase tuition and fees higher than the rate of inflation. These steps would go a long way in reducing overall cost of a higher education for the average student and create more well-rounded graduates.
    • DennisC  •  7 mths ago
      Some big athletic programs, such as U of Texas, actually make money from their athletic programs. But the vast majority cost millions of dollars a year. It's a double whammy too, since these students don't contribute in tuition along with taking away money for supporting the sports programs. They somehow need to fix this, so the students there just for academic reasons can receive a cheaper and higher quality education.
    • joseph  •  Columbus, United States  •  7 mths ago
      We have argued that the evolution of adaptations for group-level cooperation generated a coalitional psychology that came with concomitant adaptations for between-group conflict, creating simultaneously a psychology of cooperation and exclusion. The psychology of exclusion was driven both by a selection pressure to incorporate maximally cooperative members into the group as well as a selection pressure to exploit nongroup members. This analysis suggests that members of dominant groups can be expected to exploit excluded individuals opportunistically
    • forty55_  •  Washington, United States  •  7 mths ago
      Education is a major industry itself. But it is a sinking industry once society figures out creative ways to get better success by going around educational institutions instead of through them. Pushing for CLEP tests for up to a Masters Degree level with your legislators is a start and being self schooled at same time. This would give one the knowledge and the certification for employment....no more talking...just do it!!!!
    • royv  •  Richardson, United States  •  7 mths ago
      why do colleges pay for those to play football when many don't attend class or graduate ? it seems like collges are more about making money for themselves rather than educating. colleges should have to tell all their graduation rates and the average salaries of their grads.
    • STEPHEN  •  7 mths ago
      If you look at the outcome for many students you see an education that does not allow them to work in the field they have studied. placement in related careers (as opposed to employed in a non related or most likely underemployed in jobs not requiring a degree or certification). leaving the student with a vastly overpopulated or non existant job market and staggering debt as well. I think that this is just as much fraud and theft as any common thief or con man is guilty of. THEY SHOULD BE PUT OUT OF BUSINESS AND FROM CHANCELLOR TO PROFESSOR TO INSTRUCTOR AND FINANCIAL ADVISORS PLACED IN PRISON AND THEN FORCED TO FORFEIT ALL PENSIONS AND MAKE RESTITUTION WITH PENALTIES TO THE STUDENTS AND PUBLIC.
    • Yahooooo  •  7 mths ago
      Wait, you have to think to go to college? You have to have a little personal responsibility, read and understand the papers you are signing. This is not like a boilerplate liability waiver this is a thousand dollar a year purchase. When Americans start thinking for themselves instead of relying on our government officals things will improve.
      • meh 7 mths ago
        Nice argument. Too bad you deliberately missed the rather valid and painfully obvious point that personal responsibility doesn't in any way excuse or validate deception on the part of college institutions.
    • Keystone  •  Waynesboro, United States  •  7 mths ago
      Why are the Occupy groups not protesting Colleges ripping them off?
    • !  •  7 mths ago
      There is this new invention called "the internet" that allows one to conduct extensive research into darn near anything...including the cost of attendance for a specific college and how to understand financial aid. Many colleges also hold financial aid classes or mini seminars as a means to help educate people about what is available and what it all means. If you can't figure it out with a world of information at your finger tips, you would be better off saving your money and going straight to waiting tables, taking tickets at a theater, or some other low-skill, non-thinking position.
    • ♥♫♪♥MadeInAmerica♥♫♪♥  •  7 mths ago
      So, it takes a college degree to comprehend what an admission letter states. Oh wait... you haven't even enrolled so you're not intelligent enough yet to figure it out. (lol)
      When I went to University tuition costs were clearly stated upon admission and if I'm not mistaken, nothing has changed at that particular college. Maybe it's the parents who need to reread the fine print before complaining because, in my opinion, financial aid counselors and academic advisors usually try to help, not hinder, prospective students. Nor are they in habit of deceptive practices. But that's just my 'loudmouthed' (lmao) opinion. ;^P
    • Wnt  •  7 mths ago
      It's way past time for students to ask questions like why they're paying for flower gardens and football stadiums. Even more so, to question building codes written by HVAC salesmen (ASHRAE) mandating every college building with a top floor of jet turbines spewing hot air into the cold winter air all night long.
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