Understanding Your Financial Aid Letter

Dear Seniors,

Many of you have started to receive your college acceptance letters and financial aid packages.  It is important that you read the financial aid letters very carefully as some of the money you are awarded is “free money” (see scholarships and grants) and some of the money will need to be paid back (see loans).  This article from Jessica Velasco’s site (http://jlvcollegecounseling.com/2016/03/12/scholarship-saturday-march-12-2016/) does a great job outlining how to read your letters.

Understanding Your Financial Aid Letter

Some admissions decisions have come out already, while others will be sent to students soon. For many students, one of the biggest factors in choosing a college in this late stage of the admissions process is cost. If you have not received your financial aid award letters yet, they should be arriving soon. Unfortunately, financial aid and cost can be very confusing for students and their families.

One of the biggest mistakes students and their families make when reviewing financial aid award letters is assuming the award letter with the biggest “award” total is the best. However, this is not always the case. The main reason it is so difficult to compare financial aid award letters is because colleges are not required to use a standardized form. Therefore, here is some help in deciphering financial aid award letters.

1. Figure out the Cost of Attendance (COA). COA includes:

• Tuition and fees
• Housing and meals
• Books and supplies*
• Transportation*
• Other educational costs**

*Transportation, books and supplies are not paid directly to the school. These figures are provided to give students an estimate of how much they will pay while attending college for one academic year. The actual amounts will vary from student to student.

**Other educational fees will vary from institution to institution depending on other costs that are required of the student.

Some colleges will include the COA on the financial aid award letter, while others may not. If the totals are not included on the financial aid award letter, students should find the cost of attendance for the academic year they will be attending from the school website or by contacting the institution directly.

Some things to keep in mind about cost of attendance:

• Cost at many colleges will go up over the years. Some colleges might increase financial aid, while others will not. Although the colleges might not have the figures for each year, it doesn’t hurt to ask about cost and financial aid increases.
• Although all colleges give estimates for the cost of books, the amount will be different for each student and can change each semester or quarter depending on the classes the student is taking.
• There may be added costs after students register for classes that are not included in the quoted tuition and fees. For example, courses that require labs usually have extra fees not included in the quoted tuition and fees cost.

1. Calculate “free money.” Free money is all of the grants and scholarships that students do not need to pay back. There are some things students should keep in mind about free money:

• Students should find out if the scholarships and grants are renewable all four years. Sometimes colleges will add one-time scholarships to incoming student’s financial aid award letters to encourage students to choose them over other colleges.
• If the scholarship is renewable, students should find out what they must do to renew it all four years. Will the student be able to meet the expectations to renew the scholarships?
• As tuition goes up, will scholarships amounts increase or remain the same? The financial aid office should be able to answer this question.

Cost of Attendance – Free Money = Total student will pay to attend institution

1. Work-study. Work-study is another option that does not need to be repaid. However, as the title suggests, students have to work for the money. Work-study wages are usually given to the student in the form of a check, just like a regular job. Most work-study jobs will be on campus, but there may be off-campus positions also available.

Question to ask about work-study: Is the work-study job guaranteed? Just because a student is “awarded” work-study does not always guarantee a job. Students may need to seek out and apply for work-study positions, just like any other job.

1. Loans. Many financial aid award letters will include loans. These loans will need to be paid back at some point. The loans typically offered on the award letter are from the U.S. Department of Education and have low-interest rates compared to loans students might receive from a private lender. There are multiple loans that could be added on the award letter:

• Federal Subsidized Loan. Students do not need to pay back the loan until the student has been out of full-time education for six months. During the time the student is in school, the U.S. Department of Education pays the interest on the loan.
• Federal Unsubsidized Loan. Students do not need to pay back the loan until the student has been out of full-time education for six months. During the time the student is in school, interest is accruing on the loan.
• Direct PLUS Loan. This loan is offered to the parents of the students. Although this loan is included on the financial aid award letter, parents will need to show they do not have adverse credit history. Parents will set-up a payment plan.

Cost of Attendance – Free Money – Work Study – Loans =
Amount student must pay out of pocket

The amount the student has to pay out of pocket is usually paid at the beginning of each semester. Many colleges will allow students to start a payment plan. If the student wants to set up a payment plan, they should contact the school in advance to learn of the terms of the payment plan. Typically, if the student has a payment plan, the balance for the term should be paid by the end of the term.

Comparing the Offers. The most important numbers to pay attention to when comparing the offers is the cost of attendance and the free money (scholarships and grants). When students subtract the free money from the cost of attendance, the difference is what students will ultimately have to pay one way or another to attend the college. After comparing all of the offers, students and their families should choose the college that is the best fit academically, socially and financially for the student.