Aiming to make the cost of college a little more clear—and easily comparable—the Obama Administration released a new guide on Tuesday to help students understand how much they will have to pay, how much debt they may have to take on, and how likely it is that they will be able to repay the debt.
The guide, called a “Shopping Sheet,” is a one-page form created by the Department of Education and the new Consumer Financial Protection Bureau that will detail the estimated price of attending a university (tuition, housing, books, etc.), the grants and scholarships that reduce the expenditure, and the resulting net cost, or what students will actually be responsible for. The guide will show students some options for how they might be able to pay for college, including work study, loans and expected family contribution.
The form also, and perhaps most importantly, features a section on the school’s graduation rate, loan default rate and the median amount students typically borrow in federal loans at the school in question, as well as the standard monthly federal loan payment for students who borrow that amount and repay it over a 10-year period. It’s all written in plain English: for example, “Students at [university name] typically borrow $XX,XXX in Federal loans over X years. The Federal loan payment over 10 years for this amount is approximately $X,XXX per month.”
The form is designed to reduce the confusion that can come when financial aid letters arrive in the mail. Currently, there is no uniformity—financial aid letters vary from university to university (and remember, there are some 7,000 colleges and universities nationwide) and often feature confusing, and in some cases misleading, jargon that makes it difficult for families to figure out how one college stacks up against another in terms of cost.
“Countless students I meet across the country feel like the first time they really understood how much student loan debt they were in was when the first bill arrived,” Secretary of Education Arne Duncan said in a statement. “We must unravel the mystery of higher education pricing by giving students and families the information they need to make smart educational choices.”
The guide is the latest in the Obama Administration’s plan to make college more affordable, which the president rolled out in a speech at the University of Michigan in January. The idea behind the “Shopping Sheet” is that if students and families can more easily make apples-to-apples comparisons between colleges in terms of cost, they might choose the more affordable option and avoid a hefty debt load down the road. This is especially key as the average cost of attending a four-year public university increased 15% between 2008 and 2010, and as a result, students now graduate $25,000, on average, in debt. Outstanding student loan debt surpassed the $1 trillion mark in 2011.
Ideally, the guide will reduce the number of debt-stricken college graduates who say they had no idea what they were getting themselves into when taking out loans. But it will work only if the administration can get universities to use the guide. Participation is voluntary and there are no built-in incentives or sanctions to encourage colleges to comply. Secretary Duncan released an open letter encouraging universities to adopt the guide and has said he expects the majority of universities will “do the right thing.” But colleges, particularly those with the highest costs, may have little motivation to sign-on. According to Reuters, as of Monday just 10 universities had said they support the idea behind the guide.