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College aid letters are misleading students and need a legal fix

As a perspective college student, McKenna Hensley had to wade through confusing and hard-to-compare financial aid letters, trying to understand which college she could afford.
Elissa Nadworny
As a perspective college student, McKenna Hensley had to wade through confusing and hard-to-compare financial aid letters, trying to understand which college she could afford.

Updated December 5, 2022 at 10:41 PM ET

New federal research says colleges are failing to give accepted students clear and standard information about financial aid packages. The consequences can be extremely disruptive, including, for some students, dropping out of school.

"Colleges are not providing students the information they need," says Melissa Emrey-Arras, who led the research by the U.S. Government Accountability Office. "And if colleges don't do that, students can make decisions that are consequential for their futures."

In addition to potentially leaving school, she said making the wrong decision because of unclear aid information can also lead to students borrowing more than they need to, which can affect them for years, or not buying textbooks, or even cutting back on food.

The GAO report found that at best, offer letters can be confusing, and at worst, they are misleading.

Here's how it happens: When students get accepted to college, the school sends a document explaining how much financial aid the student is eligible to receive. Usually that's some combination of grants, scholarships, work-study and federal student loans.

These documents come across as marketing material. Some numbers are bolded (you got a $20,000 scholarship!) while some numbers are missing (it costs $70,000 a year!). And every letter looks different, making it really difficult for students to compare offers from different schools.

"This is egregious and unacceptable," said Rep. Virginia Foxx, R-N.C., in a joint statement with Rep. Lisa McClain, R-MI, who have introduced new legislation to make financial aid offers transparent and easy to compare. "Colleges and universities must do better." Foxx is the top Republican on the House Education Committee and requested the GAO report.

The problem has plagued students for years.

"A lot of institutions are using their financial aid offers as a way to present them in the rosiest financial light to get students to enroll," says Rachel Fishman, who co-authored a 2108 report for New America, a public policy think tank, that analyzed more than 11,000 award letters from over 900 colleges, most of which were four-year institutions. "And what that ends up doing for students and families is it's making it seem like college is more affordable than it actually is. And that's a problem."

The new GAO report looked at more than 500 financial aid offers from a nationally representative selection of colleges across the country, and found that colleges repeatedly failed to follow specific best practices.

For example, the GAO found the vast majority of colleges – 91% – did not include an adequate net price, which is how much out-of-pocket money the student or family will need to pay to attend, including through loans. More than half did not itemize costs and about a quarter (22%) of colleges did not provide any information about college costs in their financial aid offers, just listing aid.

Many failed to clearly label what aid money was free – like grants – and what students would have to pay back.

In past guidance to colleges, the U.S. Department of Education had provided a template for student aid letters. But the GAO found that only 3% of colleges used this template as their primary communication with students, and about two-thirds didn't use the template at all.

"If you have a student or a prospective student who is applying to multiple schools, it makes it very challenging to compare offers across schools if they don't have comparable information across those schools," says Emrey-Arras.

Both Fishman and Emrey-Arras point to other situations when individual consumers are making big financial decisions, like taking out a mortgage or a credit card and buying health insurance. Those transactions require legal disclosures and standardized information to help individuals make an informed decision.

But federal college loans only require that students receive counseling before their money is disbursed, to understand their responsibilities as a borrower.

"Students usually have that entrance call counseling after they get the financial aid offer," says Emery-Arras. "So it doesn't actually hit at the point where the student is getting that financial aid offer and then using that to make a decision about which college to attend."

Emrey-Arras says it's a high bar for the GAO to recommend Congressional action, but the report says that's the best next step.

"This is not an issue affecting a small number of colleges or a small number of prospective students and families," she says. "This is an issue that is affecting 91% of colleges in the United States. We think that Congress needs to require colleges to provide this clear and standard information to prospective students and their families."

Legislation to address this has come up in the past. The Understanding the True Cost of College Act, first introduced in 2012 and reintroduced last year, aimed to create a common disclosure for colleges so families and students could do apples-to-apples comparisons of financial aid offers.

It's unclear when or if Foxx's new bill, called the College Cost Transparency and Student Protection Act, may come up for a vote.

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Elissa Nadworny reports on all things college for NPR, following big stories like unprecedented enrollment declines, college affordability, the student debt crisis and workforce training. During the 2020-2021 academic year, she traveled to dozens of campuses to document what it was like to reopen during the coronavirus pandemic. Her work has won several awards including a 2020 Gracie Award for a story about student parents in college, a 2018 James Beard Award for a story about the Chinese-American population in the Mississippi Delta and a 2017 Edward R. Murrow Award for excellence in innovation.