How Do We Determine the On-Campus Housing Allowance?

The school may use any reasonable method that reflects the statute. There is no one-size-fits-all formula for this, so the school has to develop its own methodology for calculating on-campus housing costs with the following requirements and considerations in mind.

Effective with the 2023-24 award year, the housing component of the cost of attendance (COA) for students living in institutionally owned or operated housing (or institutionally contracted housing) must be based on the average or median amount assessed to residents, whichever is greater, rather than actual charges. Under Section 472 of the Higher Education Act of 1965, (HEA), as amended, [20 USC 1087LL], schools must have separate housing allowances for students with dependents and for students without dependents residing in institutionally owned or operated housing (i.e., they are now separate cost components). However, the cost for on-campus housing may vary widely between different housing options, meaning schools will likely need to have multiple housing allowances for different categories of students.

When calculating the allowances for on-campus students, the school should make sure the average or median figure that is used represents what students pay (i.e., the “amount assessed to such residents,” as indicated in the statute), rather than data that only looks at the different types of institutional housing options provided by the school.

Although the revised statute requires schools to calculate housing allowances for institutionally owned or operated housing for both students with and without dependents, it does not prohibit schools from maintaining separate categories of students within those groups defined in the statute. For example, if the housing costs for undergraduate and graduate students are drastically different and, therefore, unreasonably skew the average and median, the school could create housing allowances for undergraduate students with and without dependents, and separate allowances for graduate students with and without dependents to eliminate that impact.

NASFAA has confirmed with the U. S. Department of Education (ED) that, although schools must use the higher of the median or average costs for on-campus housing in the COA, “schools may take the median or average cost for the specific type of housing that the student is using rather than using the average or median of all institutionally provided food and housing. For example, if one type of housing (senior dorms with single rooms) costs $10,000 per year and another (freshman dorms with double occupancy) costs only $5,000, then the school would take the median or average of the specific type of housing rather than all the institutionally offered housing that is offered across the entire institution.” This method would “effectively allow a school to use ‘actual costs’ by specific housing type.”

As another example, the school has 25 housing options with different costs for thousands of students. That school is not required to (but could choose to) obtain the number of students in each of the 25 housing options times the cost of all those housing options to determine one average and one median. The school could choose to do it this way, but it is not required to. In fact, doing it this way might unreasonably skew what different categories of students actually pay for housing when there are housing options with substantially different charges. On the other hand, when accounting for the capacity of each building (rather than all students), and the charge for each of those rooms, the school may find that the average or median figures are more consistent with students’ actual charges. Either way, the school has to use its discretion to use the most appropriate way to represent what students in different categories pay at such a school.

ED went on to say, “Schools do have a lot of flexibility when determining the average and median amounts as long as they can document and develop reasonable methods… we would caution schools that would want to take average or median costs associated with only certain housing options and then apply those costs to students not living in those housing options. We believe it would be difficult for the school to be able to reasonably justify how those costs apply to students not associated with those housing options.”

Note on Use of Actual Charges: Except as noted above, the only way a school can use actual charges in the COA is to exercise professional judgment (PJ), such as when a student has costs that differ from the average or median of the specific type of housing.

Refer to Dear Colleague Letter GEN-22-15.