Students face a confusing array of options as they consider where to go to college and how to finance their education. The U.S. Department of Education (ED) has developed and maintains the College Financing Plan (CFP) to assist them. The CFP is a consumer-oriented tool designed to simplify information that admitted applicants receive about a college’s costs and the financial aid available to them.
CFP is used in this post as an acronym for the College Financial Plan, which, as noted above, is a tool to assist families. CFP is also an acronym for Certified Financial Planner, which is professional who advises people regarding financial decisions and the management of funds. The principals of College Planners of America are certified members of the National Institute of College Financial Planners (NICCP), who are financial advisors who specialize in assisting families in funding a college education in the most effective manner.
Colleges have a responsibility to be transparent about their costs and the aid granted to meet those costs so that students can make optimal decisions about how to finance their education. This information also helps them understand their expected financial obligations, an increasingly important aspect of college financing. The CFP addresses a recognized need to simplify the financial aid process, while still providing the necessary flexibility for colleges to provide additional information as they see fit.
College administrations and the software vendors who operate their data processing systems may use the HTML coding specifications issued by the Department to produce and populate the CFP form using the applicable fields from their internal systems as data sources. The major software vendors now active in the college systems marketplace can assist their client colleges in generating the CFP form for 2022-23. Colleges that plan to implement the CFP without the assistance of a third-party software vendor may use EDExpress, a software application provided by the Department that processes, packages, and manages Title IV student financial aid records.
Colleges that adopt the CFP are not permitted to modify the form to remove financial aid programs from which a student is not receiving funds. To ensure that students are able to easily compare the relative attributes of the aid offers of different colleges, the Department wants all aid components currently on the CFP form to remain there. Colleges may add information that is not included on the standard CFP form by using the box at the bottom of the form for supplemental information.
The CFP form may be used in place of or as a cover sheet to a college’s existing financial aid offer. Either approach ensures that families will benefit from an easy-to-read format that enables them to compare colleges in terms of total costs as well as grants and scholarships, student loans, and work-study options to help pay those costs. A college need not use the CFP form every time it revises a student’s financial aid package. However, since the CFP form is used by students to compare aid offers, colleges are advised to use it whenever they revise a financial aid package.
ED’s Guidance for Colleges
The ED has updated its guidance to colleges regarding what they should and shouldn’t include in financial aid offers. This information is useful to students and families so that they can understand the guidelines under which colleges must operate in financial aid practices and communications. The guidelines are summarized below:
- Stop calling a financial aid offer an “Award” and stop calling it a “Letter.” Loans are not awards, nor is work-study. Using a term like “financial aid offer” is clearer. Given that many colleges deliver these offers via electronic communications, calling them “letters” can also be confusing.
- Always include the cost of attendance (COA) in a financial aid offer. For a student or family to be able to make an informed decision, the amount of aid received must be compared to the total COA in order to determine the required student or family financial contribution. If financial aid offers exclude the total COA, students and families will be unable to contextualize the offer.
- Break down COA in ways that help students understand costs. For students and families to be able to plan how to cover their costs, the provided COA needs to be transparent about what is and is not included and whether a cost is actual or estimated. Break out individual components of the COA including tuition and fees, housing (on-campus/off-campus), and meals. Other key costs, such as books, supplies, medical insurance, and transportation, also need to be included so that students and families can consider them as they determine if a college is a financial fit. Colleges should also clarify whether the COA is based on the enrollment of a full- or part-time student, and whether tuition and other expenses are for an in-state or out-of-state student, if applicable.
- List grants/scholarships, loans, and work-study separately. Listing them separately helps students and families understand the terms and conditions of each category. Listing them separately makes clear what are grants or scholarships (that do not need to be repaid), what are loans (that need to be repaid), and what constitutes work-study (aid that must be earned by securing a job and working). Colleges should clearly label each category, and sum the individual line-items within them to provide a total for that category.
- Explain and calculate net cost in the financial aid offer. Net cost is the difference between the total COA and all grant and scholarship aid available. Students should be able to easily understand how the calculation was made, and colleges should clearly state this approximation of a student’s out-of-pocket and debt-financed remainder. Without net costs, a comparison of financial aid offers isn’t possible.
- Separate out other options for paying the net cost. Apart from Federal student loans, colleges may provide a list of other sources of funds available to students such as private loans from financial services companies. Federal student loans are available to all undergraduate students, are not subject to a credit check or other underwriting factors, and come with protections for students and families. This is not necessarily true of private student loans. Colleges may identify other potential sources of loans but must do so separately from Federal student loans. They should note that students must do their own research into the loan terms and conditions.
- Describe critical next steps in the financial aid offer. The financial aid process can be intimidating, especially for first-generation families, and come with deadlines and fees that are not obvious. Along with the aid offer, colleges should list the next steps that a student needs to follow to accept or decline financial aid.
The ED advocates that colleges execute the above guidelines to improve the clarity, transparency, and understandability of financial aid offers. When financial aid offers are understood, recipients are able to make informed decisions that may help them save thousands of dollars while also contributing to the rise of college enrollment nationally.
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