Imagine making one of the biggest purchases in your life and having no idea what the price is. You walk into a car dealership, for example, excited to purchase a new car. You test drive a few cars and select the one that you think is the best fit, but instead of then being told the price, you are immediately presented with your financing options with no real sense of your total bill. Millions of college students nationwide face this problem when it comes to what they’ll pay for their college educations. After getting into college, they receive financial aid packages that are often missing key information about costs or lacking explanations of the various loans and grants available. The award letters are frequently full of confusing and inconsistent terms, and they regularly fail to show students what they and their families will need to pay. These practices make it hard to decipher how much college will cost and how they will pay for it, much less how to compare offers from different colleges.

Over the past few months, New America, in partnership with uAspire, a national college access and success nonprofit focused on college affordability, has analyzed thousands of financial aid award letters. We believe that this research project is the first of its kind to be undertaken on this scale. This data set, provided by uAspire, contains 11,334 award letters from 936 colleges across 44 states. These letters represent 6,023 prospective students, many of whom went on to enroll in the 2016-17 academic year. Of these students, 76 percent were Pell Grant recipients, making our analysis focused on the low-income students likely to struggle the most when it comes to paying for college. We’ve taken a look at this data quantitatively to determine awarding practices for low-income students in general. We have also conducted a deep qualitative review of 515 unique award letters provided to Pell-eligible students, and have identified several problematic areas within the structure and format of these letters.

Today, uAspire’s chief policy officer, Laura Keane, will testify at a Senate Health, Education, Labor, and Pensions (HELP) committee hearing about the Higher Education Act (HEA) reauthorization and financial aid simplification and transparency. Her testimony offers a first look at our findings and reveals just how hard it is for students, especially low-income students, to understand what bill they will face when they enroll. Top findings include:

Missing “cost” information: More than one-third of the letters in our sample did not include any cost information on the page that listed the financial aid awards. Of those colleges that included cost, nearly half included only direct costs paid to the institution, like tuition and fees and on-campus housing. No mention was made of any indirect expenses that students also must cover, such as books, supplies, and transportation. Failing to communicate full cost of attendance (COA) – direct costs and indirect expenses – can later put students at risk of having insufficient funds to persist and succeed through college, or even to meet basic food and housing needs.

Missing and varied calculation of remaining costs:  Even when award letters do include some cost information, many fail to put it in context that is helpful to students. Ideally, award letters should do the math for students to show what it will cost to enroll after taking into account their financial aid. Based on our initial analysis, only about two in five letters provided any calculation of remaining costs, yet there were no clear trends of how that calculation was made. Some schools subtract aid from the full COA, while others base the calculation on what the student will pay to the school. Likewise, some schools calculate what the student will owe by subtracting gift aid only, while others also factor in loans to students. Still, other schools subtract loans to parents, making a financial aid package seem like the family owes $0, when in fact the parent may be signing up for tens of thousands of dollars in loans. The use of different calculations across letters makes it difficult for students and families to compare and make financially-informed decisions.

Inconsistent and inaccurate terminology: Financial aid award letters are filled with jargon that is often poorly explained and difficult to compare. Since Pell Grants and most federal loans do not vary from school to school, students should be able to compare award letters and decipher if the federal loan that one school is offering is the same as what another school is offering. In extreme cases, the terminology used is so obscure that students might not even know if what they received is a loan at all. For example, in our sample, we had 454 letters that offered the “Federal Direct Unsubsidized Loan,” and we identified 143 unique titles for the loan. Of those, 26 letters do not even use the term “loan,” instead of using terminology such as “Fed Direct Unsub” or “Unsubsidized DL.”

Combined and undefined aid types: Less than one-third of the letters in our sample split out different types of aid under separate headings, identifying grants/scholarships as money that does not have to be repaid and distinct from loans and work-study. The majority of letters group all aid together and most schools do not include definitions of different types of aid, making it hard for students to understand the long-term implications of their enrollment decisions. This issue particularly affects students who are less familiar with financial aid.

In cases where letters do include definitions, some of those definitions provided may actually cause more confusion for the student, as illustrated by this head-scratching example from an actual award letter below:

Work Study Earnings are normally used to defray personal expenses during the school year. However, by participating in the Work Credit Plan, you may contract to apply up to 90% of your work authorization to your statement of account (example, $2,200 x 90% = $1,980).

The forthcoming report from New America and uAspire will provide a detailed analysis of these and other key issues with award letters, and provide recommendations for how institutional leaders and policymakers can improve the communication of financial aid packages to students. While promising practices exist, students are too often left in the dark when it comes to understanding the true cost of college.

We look forward to engaging with researchers and federal, state, and institutional policymakers about how to make financial aid packages easier to compare and navigate. In the meantime, you can download Laura Keane’s full written testimony below along with examples of real award letters and format cases.