08/16/2012 12:33 pm ET Updated Oct 16, 2012

The New College Financial Aid Shopping Sheet: Know Before You Owe!

Many students when applying for college financial aid don't understand what they're signing up for. They often receive confusing financial aid letters -- loaded with inconsistencies -- from schools that make it difficult to accurately compare the costs of different colleges. The lines between grants, loans, work-study, need-based and non-need-based aid vary from school to school, making it difficult to compare packages.

Enter the Shopping Sheet-- an individualized standard financial aid letter designed to help students understand their costs before making the final decision on where to enroll. The Shopping Sheet will allow students to easily compare aid packages offered by different institutions. To create the Shopping Sheet, the U.S. Department of Education partnered with a new independent agency known as the Consumer Financial Protection Bureau (CFPB).

The Shopping Sheet reveals the costs and responsibilities of student loans upfront -- before students have enrolled -- outlining their total estimated annual costs, institutional rates of completion and default. Also included is an estimate of the monthly payments that will be expected upon graduation. The sheet also makes clear the difference between grants and scholarships, which students don't have to pay back, and loans, which they do.

The Shopping Sheet will standardize award letters, making it easier to comparison shop and provide students with key information including:

• How much one year of school will cost.

• Financial aid options to pay this cost, with a clear differentiation between grants and scholarships, which do not have to be repaid, and loans, which do.

• The net costs after grants and scholarships are taken into account.

• Fundamental information about student results, including information comparing default rates, graduation rates, and median debt levels for the school.

• Potential monthly payments for the federal student loans the typical student would owe after graduation.

Right now the impact of the Shopping Sheet largely depends on who decides to use it. If some big-name institutions start using the Shopping Sheet, competing peer institutions may feel they need to use it as well. Colleges can adopt the form voluntarily, and U.S. Secretary of Education Arne Duncan published an open letter to U.S. colleges encouraging them to adopt the new form.

The sheet has been met with enthusiasm from schools so far, with at least 10 major undergraduate institutions -- representing about 1.5 million students -- already pledging to adopt the form, including Arizona State University and Syracuse University.

These institutions, however, will only be a drop in a large bucket of more than 6,600 institutions. In fact, the Shopping Sheet will have the most significant impact on prospective military and veteran students, because for them, the Shopping Sheet will be a requirement.

According to President Obama's recent Executive Order, institutions that receive funds from Federal military and veterans' educational benefits programs must provide the Shopping Sheet to its students.

Students when receiving their financial aid award letter next year may see the "shopping sheet" and may not. Let's keep a close eye on colleges and see how they vote.