Colleges Tight-Lipped On Revealing How They Divvy Out Financial Aid

When choosing a college to attend most teens and their families shop around a little. With tuition skyrocketing, many consumers look at financial aid offered by universities as a top priority when considering which institution to attend. Even with regulations on the books requiring schools to outline how financial aid is distributed, families are finding it nearly impossible to estimate their child’s worth to a school.

Universities use test scores, transcripts, financial profiles and detailed data to make a decision on how much aid a student should receive. But families are left largely in the dark when trying to estimate how much aid their child could receive from a particular school, ProPublica reports.

With student loan debt piling up and often affecting a student’s ability to make purchases in the future, understanding financial aid opportunities available to students is as important as ever.

Most colleges only offer vague disclosures about how they allocate their financial aid dollars and they don’t reveal the formulas used to make decisions, Mark Kantrowitz, a financial aid expert with Edvisiors a publisher of websites about paying for college, tells ProPublica.

While we don’t know the full criteria schools use when deciding who gets financial aid and who doesn’t, it’s becoming clear that some schools are strategic in their giving.

ProPublic reports that some schools use aid as a way to attract student to meet the institution’s own goals. Often financial aid leveraging is used to entice students who will help raise a school’s ranking, who will help bridge gender gaps, or who will fill out a program. Many times the goals are different from helping the students that need it most.

Data from a small liberal-arts college in Kansas shows the school charged students in the lowest income bracket several thousand dollars more than students in the two income brackets directly above them. Officials for the school said the outcome was not intentional, but its students meeting other criteria that are getting assistance. They declined to disclose the criteria used to make such decisions, saying it was proprietary information and used to keep the school competitive.

In recent years, the government has unveiled two consumer tools to provide students with individual cost estimates. The model financial aid award letter and college’s net-price calculators can help student understand the cost of college, but don’t add any transparency to how schools are doling out the dollars, ProPublica reports.

A former congressional liaison in the Department of Education’s Office of Legislation tell ProPublica that with a little tweaking a current regulation could be the best bet for true transparency.

Schools participating in federal student-aid programs are required to disclose the criteria for selecting recipients of financial aid from the group of eligible applicants and the criteria for determining the amount of a student’s award for federal and state aid, as well as, the financial aid the school gives out themselves, ProPublic reports.

However, the law and regulation does not specify what details colleges must disclose, meaning many disclose very little. The former liaison says spelling out what criteria universities have to reveal could make the regulation more sound.

The U.S. Department of Education press secretary did not answer ProPublica’s questions on what the regulation actually requires or if the department has ever enforced the transparency regulation.

The press secretary did say the DOE was working with institutions and the Consumer Financial Protection Bureau to develop a way for students to be best served in receiving clear, easy-to-understand information on aid packages from their college.

How Exactly Do Colleges Allocate Their Financial Aid? They Won’t Say [ProPublica]