Where Are the Consumer Rights Advocates When You Really Need Them?

Consumer rights advocates work themselves into a wrathful froth over the misdeeds of banks, payday lenders, credit card companies, and mortgage lenders. But what about the truth-in-lending abuses perpetrated by institutions of higher education? We don’t hear so much.

With the cost of attendance of a four-year degree routinely exceeding $100,000, selecting a college can be one of the biggest financial decisions that Americans can make — probably the biggest decision for low-income families that never purchased a house. But the financial terms and conditions provided in acceptance letters are notoriously opaque, finds a study by the New America think tank and financial-counseling firm uAspire.

The two outfits published a study last week based upon an examination of 11,000 award letters sent in 2016 by more than 900 colleges. Summarizes NewAmerica’s Kevin Carey in the Wall Street Journal: “It found most of them use obscure terminology, omit vital information, or present financial calculations that appear deliberately deceptive. Many letters are confusing in their own unique ways, making it difficult for students to compare colleges.”

Of the 515 colleges that awarded them via nonstandard letters, more than a third provided no information about how much attending school would cost. The letters highlighted grants and scholarships as a way of convincing students to enroll, but without listing tuition or explaining how much money students would owe. …

The letters that did disclose costs were inconsistent. Some listed only tuition. Others included room and board. Others added books and estimated living expenses. … Seventy percent of colleges with nonstandard letters created further confusion by lumping together grants and loans, as if both were freebies.

Carey cited a letter sent by the University of Arizona that told a student that the cost of attendance was $48,200 a year, then subtracted $5,815 in grants, $5,500 in work-study opportunities, and $26,885 in loans. “Net Costs After All Aid” were “$0.00.”

A used car dealer who delivered a pitch like that would be slammed with a fine and driven out of business.

Many (not all) public colleges and universities engage in practices that would make a payday lender blush. It all makes sense when you understand that higher-ed institutions are, beneath the lofty rhetoric about justice and equality, mechanisms for the extraction of wealth from students and taxpayers, the pursuit of status and prestige within the academic community, and the remuneration of elite faculty and administrators.

Feeding the system requires inducing as many students as possible to enroll, which is becoming increasingly difficult as the cost of attendance continues to outpace incomes and financial aid.

How can lower-income Americans be protected from the higher-ed racket? New America recommends requiring colleges to use a standardized award letter that explains expenses, grants and loans clearly so recipients can easily compare offers by competing institutions. The Department of Veterans Affairs already mandates this kind of transparency for students benefiting from the GI Bill. Congress should require a standardized letter for all institutions receiving federal money.

And if Congress doesn’t act, I would suggest, the Commonwealth of Virginia could require a standardized letter for all state institutions — or, at the very least, for institutions offering state-funded financial aid. Colleges and universities should be free to determine the substance of their own financial aid packages, but there should be full transparency in how those packages are presented to students and their families.

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7 responses to “Where Are the Consumer Rights Advocates When You Really Need Them?”

  1. Anticipating the inevitable response from LarryG: I do not oppose all regulation — just regulations that unnecessarily burden business or restrict consumers’ choices. As a rule, I favor regulations that promote transparency.

  2. Totally would agree with this. Who would carry it you think?

  3. djrippert Avatar

    The youngest Echo Boomers turned 22 last year (2017). Colleges and universities will see reduced numbers of students applying. Meanwhile, many of them expanded their facilities to accommodate the growth of applications caused by the boomers. The only answer may be the enrollment of foreign students. This might represent an opportunity to close the gap on the immigration debate. If you can get into a US college / university and pay “full boat” you get a student visa. If you graduate with an employable degree you get a green card. If you stay out of trouble, work and pay taxes for 7 years you are offered US citizenship.

  4. Steve Haner Avatar
    Steve Haner

    Since virtually every private college in Virginia expects the state to provide those popular TAG (tuition assistance) grants to Virginia residents who enroll, that could be the hook for requiring a standard and transparent format on the letters. This would be a task for the folks at SCHEV.

  5. vaconsumeradvocate Avatar

    As one of those consumer advocates who folks do such a good job of ignoring I can tell you that the consumer advocacy community has been on this issue for several years – most folks just do not notice what we do/say.
    Also, the Consumer Financial Protection Bureau (CFPB) has been collecting data intended to be the basis of making a case for necessary legislation and one of the first things it put into motion was providing education via its website – along with a tool to use when comparing offers from several schools. Those seeking to destroy the CFPB have also stopped forward progress on all student financial aid problems. Thankfully, they have not yet removed the website that provides help: https://www.consumerfinance.gov/paying-for-college/
    Many of us also teach students and their families about student loans, seeking to give them advance ammunition to protect themselves. Often, this happens within existing personal finance courses offered on college campuses but increasingly, there are stand alone sessions offered to students.
    Cooperative Extension across the nation (offered in Virginia by Virginia Tech and Virginia State University) has done much of this education, especially that targeting those preparing for college education funding. However, the staff that provide this education in Virginia has been cut back so severely over the last 20 or so years that most people are probably unaware of the work unless they are lucky enough to have a local FCS Extension Agent locally.
    Far more needs to be done, but consumer advocates/educators continue to address this critical need.

    1. I would hope that consumer loans offer enough commonality that a standardized calculation of the effective interest rate and other terms could be enclosed even with these student acceptance letters. Maybe it would have to be a State mandate for now, but it should become national. Consider the example of the universal disclosures sheet now used at all mortgage closings nationwide. We know that those who offer consumer loans have no interest in making apples-to-apples comparisons easy; isn’t this one area where Libertarians, Neo-Cons and Liberals should all agree?

      Yes, Larry, I agree, “Higher Ed is no better than a pay day loan shark in its dealing with .. kids.” SH, I would hope SCHEV could become the force behind initiating such a disclosure requirement.

  6. LarrytheG Avatar

    Oh the SHAME of a self-avowed Libertarian calling for MORE regulation – excuses and all!

    Let’s be honest – no self-respecting non-FAUX Libertarian would be caught dead advocating that it is NOT the responsibility of consumers to be educated and to make informed choices! Here we have unabashed MORE cries for the whiny nanny-state!

    Oh the SHAME!

    Yes – Higher Ed is no better than a pay day loan shark in it’s dealing with .. kids – AND usually their College-educated parents but how many times have we read in BR that payday loan sharks offer a VALUABLE service that really HELPS people.. and now we get this sniveling mea culpa when it comes to higher ed. Good Googly Moogly!

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