College costs are high — this is not news. Even with advance planning, it is likely to be one of the largest financial decisions families make in their lives. Student loan debt is high too; currently $1.5 trillion is outstanding. The average cost of tuition and fees can range from about $10,000 to upwards of $36,000. And that number nearly doubles when adding living expenses!
At Edmit, we work with families to help them make smart financial decisions about college. And we find that too many families do not feel empowered in the process, and have trouble making sense of everything.
We’ve been observing and tracking how institutions can address these issues effectively. Based on our experiences, here are five of the most important things colleges can do to promote better decisions for students. Not only can these help educate students and families on the cost of going to a particular college, but they are investments that colleges can make to demonstrate just how much they truly care about their students’ financial well-being.
1. Help students clearly understand their cost of attendance (and simplify your pricing)
When a university paints a realistic picture of what it costs to go there, it allows students to plan accordingly. It’s often very difficult, even for an expert, to find the total cost of attending a given institution (seriously). If I can’t, how can we expect it of the average student or parent?
Usually colleges and universities will provide a page listing tuition and fees. While this is a good start, the pricing is often very complex — requiring a visitor to know how many credits or credit hours they will enroll in, or even what courses they’ll take. Enumerating every required fee is helpful — but colleges should do the math for the student so that they don’t have to take out a calculator. And it is necessary to clearly state and estimate all of the other costs the student might incur – from housing to meal plans, health insurance, parking, or other living expenses.
Schools are required to offer net price calculators and to keep them up to date. Too often they are buried and not user-friendly.
2. Create easy-to-understand financial aid letters
Not all financial aid letters are created equal. Too many are difficult to understand and interpret. A 2018 New America report, Decoding the Cost of College, showed that “more than one-third did not include any cost information with which to contextualize the financial aid offered.” This basically means that families are able to see what the ‘award’ is, but not the full cost. Nearly half (40%) did not calculate what students would actually need to pay after aid and scholarships — leaving much open to interpretation. Further, New America found significant issues with misleading language and jargon across the letters it reviewed. We sign on to all of New America’s recommendations, which were recently echoed and extended by Federal Student Aid in its guidelines for financial aid offers.
3. Be transparent about student loans
There is often confusion about the different types of student loans and the actual, true costs involved in taking out a student loan. In the New America report mentioned above, there was not only confusing terminology and jargon (some of which did not even include the word “loan”), but 15% of the financial aid award letters they reviewed including misleading information about Parent PLUS loans — including them in the “award” in order to make the package appear much more generous.
Loans are not technically awards because you need to pay them back. Students should commit to a school with a clear understanding of how much they will be borrowing, and what that will mean on the other side — and colleges should support education on this topic throughout a student’s enrollment. Here are two great examples of getting ahead of any misunderstandings: Baylor University holds sessions about loan repayment for its students, and Iowa State University offers a variety of educational opportunities, sessions, and sometimes even contests through the boldly-branded “No Fear Finance” from the loan education office.
4. Establish a well-rounded financial literacy program
Financial literacy is not only important, but it is a necessary component of adulthood. A well-rounded financial literacy program should include many different ways for students to access the valuable information.
Students are busy and always on the go. Taking into consideration a typical college student’s lifestyle, a great financial literacy program incorporates online learning workshops, tools, and videos. An example is the University of Central Florida’s Centsible Knights Financial Literacy initiative. They offer a large number of learning opportunities catered to busy college students, addressing many topic areas and providing multiple avenues of education and learning.
It is also helpful to connect these initiatives to social media in an effort to make them even more accessible to students. Emory University does a wonderful job linking their financial literacy initiative to a corresponding Facebook page. Boston University connects with students on its Smart Money 101 Twitter page.
5. Support peer-led financial literacy organizations
Peer-led financial literacy-based organizations are another best practice worth including here. Many students will listen more closely to suggestions and advice from others who have been in the same situation. This is especially true for college-aged individuals, as they begin to form their own identities and enter into adulthood. They strive for independence and are much more likely to connect with a peer offering tips about financial wellness than a professor lecturing them. Lehigh University, UMass Amherst, and the University of Georgia all have great examples of well-run peer-led organizations. In addition to hosting public pages with links to information and resources, they offer peer-led counseling about financial education topics.
Better informed, better borrowers, better student outcomes
Creating more transparency and educational initiatives for students will lead to better outcomes for students and families – and, we believe, for colleges. We see firsthand the frustration and confusion that families face when facing this information, and it contributes to the anxiety about (and in the more extreme cases, distrust of) higher education. What aligns best with the university mission is to invest in initiatives that promote financial wellness at all stages of the enrollment pipeline – from prospect to applicant to accepted student and, eventually, successful graduate.
Sabrina Manville is co-founder of Edmit, which helps families make smarter financial decisions about college. She was previously an AVP at Southern New Hampshire University and has worked with leading higher education institutions throughout her career to better serve students and their missions. Her prior experience includes work with ed-tech companies, Pearson, and Ithaka.