The “Familiarity with Financial Aid Survey” Sheds Light on Students Financial Aid Decisions

August 21, 2015

A new report says better outreach and simpler financial aid information would help students choose the right college and know how to pay for it. Students never want to plan for the unknown, but when the “unknown” refers to how much college will cost and how to pay for it, experts say some students become so discouraged they never even apply. That explains why the findings in a report from the New America Foundation show concern: Nearly a quarter of prospective students surveyed said they did not know whether they could receive financial aid, even though nearly nine out of 10 said the cost of college or availability of aid meant a lot in deciding which school to attend.

The report, “Familiarity with Financial Aid,” a part of a series of papers based on a survey that looked at various aspects of college decision making, including how students choose a school and pay for their education, found that students recognized scholarships they received from college (82%), student loans (79%), and state scholarships or grants (61%). Less than half, however, knew much about Pell Grants—the federal grant worth $5,775 this year given to low- and moderate-income students—and only about a third knew other ways to make college costs more affordable, including tax deductions and federal work-study.

Of the undergraduates who filed for federal financial aid, 92% with family adjusted gross incomes of less than $50,000 received a Pell Grant, according to data from the US Department of Education. Yet in this survey, 48% of students in the same income bracket did not understand the Pell Grant, including more than a quarter who had never even heard of it. Knowing about the “free money” available to them could change where low- and moderate-income students apply to college or whether they apply at all, said Rachel Fishman, a senior policy analyst at New America and the paper’s author. Pell Grant status also acts as a qualifier for many state and school aid programs, so receiving a Pell Grant often opens the door to a lot more money for school.

The paper supports allowing families to use older tax information when applying for financial aid, a policy proposal that has gained significant support among college access advocates and some lawmakers in the past year. That change would make it possible for families to complete the Free Application for Federal Student Aid (FAFSA) earlier. Other initiatives that Fishman says could improve students’ familiarity with financial aid include early commitment programs, which would tell students what type of aid they would qualify for as early as 8th grade, and an improved system of net price calculators to give them an estimate of how much they would have to pay at a particular college based on their family income.

Only 14% of students said they had used a net price calculator, and half of survey respondents said they had never heard of the calculators before. While the Education Department has net price data on its College Navigator website, Fishman said it help more to provide a more personalized formula, rather than the broad income brackets that the federal information circulates around now. Likewise, colleges have to publish a net price calculator, but finding it often requires digging through multiple pages of a website. Fishman suggested creating a single website where students could submit their financial information once, and then see cost estimates from all the colleges they have interest in.

“For lot of these resources, students have to have to the savvy to go out and find them,” Fishman said. Interestingly, while the majority of students in the survey said that they had found high-quality information regarding financial aid, 63% of respondents also reported feeling lost at some point during their research. Fishman thinks that indicates how complex financing higher education has turned into, with grants, different types of loans, and seven loan repayment plans. A simple web search will return a ton of information, Fishman said, but “students still leave confused because it’s such a complex, confusing system.”