Seeking to address the growing controversy over financial aid award letters, Representative Lisa McClain (R-MI) and Ranking Member Virginia Foxx (R-NC) introduced the College Cost Transparency and Student Protection Act. The bill is a response to a recent GAO report recommending that Congress consider legislation requiring colleges to provide students financial aid offers that follow best practices for providing clear and standard information. 

The report found that, according to best practices, colleges should estimate “net price” on offer letters to students.  However, the report found that about 91% of colleges reviewed by the GAO understate or don’t include the net price at all in their financial aid offer letters. This bill recommends that all financial aid offers should:

• Comply with requirements published by the Secretary of Education;
• Use standardized terms and definitions;
• Not be referred to as an award letter;
• Follow new federal formatting requirements;
• Not list loans as reducing the cost of college; and 
• Require students to agree to the “direct costs” component of an offer before the “indirect costs” component, allowing students to self-select what aspects of a postsecondary education they want financial aid to apply to.

The bill defines direct costs as tuition, fees, other expenses as required by the institution and presented in an itemized list; grants; scholarships; institutional grant aid; and out-of-pocket costs.  Indirect costs are defined as all other cost of attendance components as selected by the student as needing additional funds.

The bill also states that the Department of Education cannot mandate a uniform format for offer letters and requires consumer testing to be conducted to serve as the basis for determining the requirements the agency will develop. Additionally, the bill would require the College Scorecard to list the direct and indirect costs at the institution for out-of-pocket expenses that the student would pay as part of their newly defined net price and cost of attendance.  The College Scorecard must also list the median earnings and payments on loans (excluding PLUS loans) at the institution for students who complete a program of study.

NAICU is one of ten higher education associations participating in a taskforce focused on providing students with financial aid information that is clear, accurate, and transparent about the cost of college.