Watchdog: Few Colleges Accurately Disclose Cost of Attendance

• The Government Accountability Office analyzed financial aid offers from 176 colleges in the U.S. for this report.
• It found that few institutions tell prospective students how much the school will cost them out of pocket.
• High-ranking Republican lawmakers introduced a bill to address problems brought to light in the report.

Most colleges and universities are keeping students in the dark when it comes to the true cost of attending their institution.

The U.S. Government Accountability Office (GAO) reported that only 9% of the institutions it examined accurately told students the estimated net price of attendance through financial aid offers. That analysis comes after reviewing offers from 176 colleges and universities to compare those offers to a list of 10 best practices determined by GAO using Department of Education (ED) guidance.

To address this discrepancy, GAO recommends that Congress enact a law that clearly defines what information institutions must include in financial aid offers.

Some lawmakers quickly responded to the call to action.

Education and Labor Committee Republican Leader Virginia Foxx of North Carolina, who asked GAO to review college financial aid offers, introduced the College Cost Transparency and Student Protection Act on Monday. The bill would force institutions that receive federal funds to list both direct costs (tuition and fees) and indirect costs (housing, books, etc.) in financial aid offers, among other things.

Lawmakers would have until January to pass this during Congress' ongoing lame-duck session.

Lack of Transparency Obscures True Costs

The overwhelming majority of colleges and universities are either understating or don't include the net cost of education.

According to GAO, 41% of the institutions it surveyed don't list a "net price" of attendance at all. Another 50% do, but they do so incorrectly by either excluding indirect costs or including loans as if they were grants or scholarships.

That leaves 9% that GAO deems transparent with the cost of attendance.

"The different approaches colleges use to present information make it difficult for students and parents to accurately compare different colleges' costs, determine how much they will need to pay, how much they would need to borrow, and whether a college is affordable," GAO's report states. "The net price reported on a financial aid offer would ideally help students understand their financial obligations, but the wide variation in how colleges present this information can create confusion."

The report provides examples of the most common problems in financial aid offers using offers submitted by surveyed schools.

One of the most striking examples includes a college that listed a $35,000 Parent PLUS loan in its financial aid package to a student. This gave the appearance that the student would not have to pay anything their first year, despite a Parent PLUS loan potentially burdening the student's parent or guardian with decades of debt.

Another example shows a financial aid offer that only lists the direct cost of attendance (tuition and fees). A better alternative would include indirect costs to give the student a clearer picture of what it will cost to attend, GAO stated.

Other Issues With Aid Offers

Of the 10 best practices GAO identified, none of the surveyed colleges fulfilled all 10.

Moreover, 63% followed five or fewer of the 10 best practices.

Here are some of the remaining best practices, as well as the percentage of colleges whose offers did not meet the standard for that practice:

Some colleges (about a third, according to GAO) supplement their financial aid offers with the College Financing Plan. This is an ED-developed template that adheres to all 10 best practices.

Colleges can use the College Financing Plan as their official offer, but GAO estimates only 3% do so.

What's Holding Back Change?

GAO's report also explores why colleges may send vague financial aid offers.

First, it's a matter of competitive advantage. Colleges that list the full cost of attendance may see fewer applicants because students would instead prefer the school with the lower listed price of attendance, even if that lower price is due to a lack of transparency.

GAO also conceded that there might be technical reasons colleges skimp on providing more data. Some schools' software may limit their ability to adhere to best practices.

Lastly, the report stated that a lack of resources might hold smaller schools back from being able to update their financial aid offer templates.