The following editorial was written by Bloomberg Opinion:
Whether President Joe Biden’s misguided plan to forgive some $400 billion in federal student-loan debt goes forward will ultimately be up to the Supreme Court. For now, there’s more the federal government should be doing to rein in the costs of higher education — and thus reduce how much students borrow in the first place.
In particular: It should insist that colleges stop hiding exactly how much students are expected to pay.
Federal law requires colleges to list the cost of tuition on their websites and in other promotional materials. Many schools also send admitted students award letters that calculate the net price they’ll owe after deducting various forms of financial aid, which can include merit scholarships, federal and state government-funded grants, and work-study programs.
In theory, students should be able to use this information to compare the costs of different institutions and decide which one best fits their budget. In practice, such letters are highly inconsistent, needlessly confusing and, in some cases, downright misleading.
A recent report by the Government Accountability Office found that in a sample of 204 schools, half didn’t disclose the full cost of attendance — which includes expenses such as housing, meals, books, supplies and transportation.
Another 15 percent of colleges treated federal student loans as a form of financial aid, alongside grants and scholarships, neglecting to point out that those loans must be repaid with interest.
By concealing such costs, colleges encourage students to make choices their families can’t afford, increasing the chances they will drop out due to financial distress. The lack of transparency also makes it impossible for consumers to make reliable cost comparisons. This harms competition and reduces incentives for colleges to keep their prices in check.
Despite attempts by the federal government to promote greater clarity and consistency, colleges have resisted pressure for reform.
A bill introduced in the House charts a sensible middle ground. It would prohibit the secretary of education from mandating a single, uniform award letter, but would tighten oversight of financial-aid offers, requiring that they estimate not only the cost of tuition but also indirect expenses. Schools would be banned from classifying federal student loans as a form of aid.
The bill also requires schools to supplement aid offers with information on the monthly earnings and loan payments of their graduates, which would enable prospective students to make more informed decisions.
The runaway cost of college has saddled millions of Americans with student-loan debts they’re unlikely to fully pay back, depriving the government of revenue and harming taxpayers in the process. Requiring true transparency from colleges is a necessary step toward repairing a broken system.
