It’s college decision time for high school seniors, transfer students, returning students, and anyone who wants to go back to school, Rodney Dangerfield-style.
And if you’re not independently wealthy like Thornton Melon, that means analyzing incomprehensible financial aid letters.
What’s the problem with financial aid letters?
Every school has its own version, and they’re inconsistent in the way they label costs (tuition, fees, books, transportation, room and board), free money (school grants, scholarships, state grants, federal grants), loans (various federal student loans and parent loans), and work study.
Last summer, the US Department of Education stepped in and asked colleges to adopt a standardized financial aid letter called the Financial Aid Shopping Sheet.
The goal of the shopping sheet is to make financial offers so easy to compare, even Rodney Dangerfield could do it. And he’s dead.
Note that the government asked the colleges to get on board. They didn’t require it.
Even so, more than 500 colleges adopted the Shopping Sheet. Those colleges—including schools like University of Arizona, Notre Dame, and Smith College—enroll 13% of all undergraduates in the country.
Great. What about the other 87%?
Dare to compare
That’s where a free website called College Abacus comes in.
“We’ve created a mirror system to the federal Financial Aid Shopping Sheet, which we think is great, but unfortunately, it’s voluntary,” says College Abacus spokesperson Abigail Seldin.
The company’s Abacus Shopping Sheet lets you enter data from any financial aid offer, whether it’s in Shopping Sheet format or not, and then compares the net price of those colleges. It looks like this (the numbers here are totally fabricated):
The net price is simply the total of all expenses minus all free money (grants and scholarships). It doesn’t include loans and work study, because those things don’t actually affect the price you pay.
“While we’ve enabled the student to add in these other items and sum them, we’re not counting it against the net cost,” says Seldin.
Yes, you could calculate this on your own and make a spreadsheet.
But College Abacus offers hints along the way that help decode the inconsistent terms used in financial aid letters, which are confusing at best and misleading at worst, says Seldin: “Some of these letters don’t mark that Stafford loans are, in fact, loans.”
Right now, you have to enter data manually into the website from your letter. But more and more colleges are sending electronic financial aid letters, especially to returning students (who can access their letter via the college’s secure message system, so it doesn’t get spam-filtered).
Seldin says College Abacus is working on a system where you’ll simply forward the email to them and it will pull in numbers automatically, a feature she likens to the travel site TripIt.com, which does the same for airline itineraries.
Or, to put it self-servingly, think of it as the Mint.com of financial aid.
A few months earlier…
Of course, prospective students and parents should be thinking about the price of college long before financial aid letters arrive.
The federal government has also stepped in here by requiring that college websites post a Net Price Calculator (NPC), which I wrote about last year.
In short, an NPC asks for the the same kind of information you have to cough up when you fill out the FAFSA—income, savings, number of kids in college—and gives an estimate of how much aid that college will offer you, directly and via state and federal aid.
College sticker prices, the ones that make headlines (“College now costs $1 million!”) are irrelevant to the majority of students, because most students receive grants.
Unfortunately, NPCs suffer from the same problem as financial aid letters, only more so: each college has its own calculator, which asks for different information, and you have to fill them out over and over.
Wouldn’t it be great if you could go to just one website and…
Yes, College Abacus has a horse in this race, too: fill out a single, detailed questionnaire, and the website will run it through the NPCs of all the colleges in its database.
Unfortunately, that database is pretty limited. I searched for my alma mater, University of Washington. It’s not in there.
What about my other alma mater, Pomona College? Nope. Seldin says they’re working on it. They’re planning to add a large batch of colleges in a month, then expand to all colleges by September 1.
In the shadow of Uncle Sam
Comparing college prices in this way seemed like a clever but rather obvious idea, so I asked Seldin who she sees as her competition. That’s easy, she replies: the Consumer Financial Protection Bureau.
“They’re the only folks out there who would really want to do it, but it’s a technical challenge,” says Seldin. “The federal restrictions around NPCs are loose. The colleges are strong, independent, and not interested in being regulated around their financial aid practices. To corral them into using a shared system would be an undertaking.”
In terms of price transparency, colleges are only slightly better than health care and 401(k) plans. The conversation about the price of college and the burden of student debt keeps getting louder.
If College Abacus can help students apply to and accept offers from colleges they can actually afford, it deserves—as Rodney Dangerfield might have put it—some respect.
Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.