After the federal government unveiled an online cost comparison tool to help families manage the expenses of college education last week, the tool has drawn criticism from colleges for misrepresenting the amount of debt students are likely to incur.
The Financial Aid Comparison Shopper, which was released as a beta version by the Consumer Financial Protection Bureau, allows prospective students to compare up to three universities and calculates the student debt that will be incurred each year. It bases its calculations on the overall cost of attendance and subtracts the average value of scholarships and grants awarded to determine the amount of money that a student would need to borrow. “Now, more than ever, students and their families need to know before they owe,” CFPB director Richard Cordray said in a press release.
According to Scott Fleming, associate vice president for federal relations, the numbers that the website provides overestimate the actual debt incurred by attending Georgetown or similar institutions.
“I’ve talked to several of the associations of higher education institutions that we belong to and I think it is pretty broadly felt … that the data is confusing,” Fleming said, adding that it was unclear how theCFPB calculates costs.
The tool reports the expected amount of debt in terms of how many $50 textbooks it would cost every month to pay back the loan in 10 years. The construction of the website is part of an ongoing project between the CFPB and the Department of Education and provides data for more than 7,500 schools.
For Georgetown University, the site estimates that the average student would be required to take out over $27,000 in loans each year and would need to pay about $1,637, the equivalent of 33 textbooks, each month for the next 10 years in order to repay those loans.
According to Fleming, the average total student loan debt for Georgetown’s Class of 2011 was about $12,000, and the university’s Office of Student Financial Services limits the total cost of student loans to $17,500 for all four years when creating a financial aid packet. The online tool, however, estimates that students would be required to borrow more than six times that amount in a four-year period.
Tony Pals, director of communications at the National Association of Independent Colleges and Universities, echoed Fleming’s concerns.
“The website grossly overestimates the average yearly debt of students,” he said. “The number that you see for annual debt on the website would be the total debt of students after 4 or 5 years of study.”
Fleming said that it is possible that a student who does not qualify for financial assistance, and whose family does not wish to pay anything out-of-pocket, may borrow more than the estimated amount. He added that financial aid is a case-by-case issue and those averages are not representative of the actual cost of attendance.
Fleming expressed concern that the site may affect prospective students’ university choices because its launch coincides with the release of college acceptances.
“We think it’s really distorted, and quite frankly that’s frustrating,” he said. “[Prospective students] may look at this test site and get a very distorted sense of what it’s going to cost to go somewhere to college. That’s worrisome.”
Pals agreed, but also feels that the website may have some uses for prospective students.
“I do want to note that the website can be useful for comparing financial award letters,” he said. “The problem is in order to get to that part of the site you have to go through pages that are using inaccurate data.”