The Fuzzy Math in Financial Aid Offers

When Susan Romano first read her son Zach’s financial aid letter from Drexel University, a private college in Philadelphia, her eyes immediately jumped to the line highlighted in yellow: “$13,442 expected payment” for the first year at the $63,000-a-year school. “At first, I thought it was great,” says Romano, an insurance claims representative from Huntingdon, Pa. “The more I read it over and over, the worse it got.” It turned out the college’s “offered financial aid” included $42,000 in loans to be taken out by the family. “A loan to me is not financial aid,” says Romano. “It is money I have to pay.”

While the federal government requires banks and mortgage companies to disclose interest rates and total payments on loans, the financial aid letters sent out by colleges are often unclear about how much families will have to pay. The format for packages varies by school, making it difficult to comparison shop: Loans and grants offered by the federal government are lumped together with the school’s scholarships, and the statements often don’t include information on interest rates.