Understanding Your Financial Aid Award Letter


As a former college and career adviser, I’ve witnessed countless students anxiously awaiting the arrival of their financial aid award letters.

For many of you, receiving your award letters from your colleges or universities is the most important part of your entire college decision process. Your award letter is the document that will outline your financial aid package from each school: the total cost of attendance, expected family contribution, scholarships, grants, loans, and what has to be paid out-of-pocket. If only reading and understanding these award letters was an easy task.

No worries, we are here to help!

If you are having a hard time reading and comprehending your award letters, you are not alone. Many award letters/award packages from colleges are often difficult to understand, especially if you are the first person in your family to attend college.

The first step to understanding your award letters is to decipher the amount you’re being given, the amount you’re borrowing, the amount you must pay out-of-pocket, and if all of these amounts cover the total cost.

The Basics

Cost of Attendance (COA): How much the college predicts it will cost for you to attend their school (usually for one year). This will be the largest number on your award letter. Typically it includes the price of tuition, room and board, books and supplies, transportation, fees, and miscellaneous expenses. The items included in the COA can vary from school to school. It is important to note that you cannot take out a student loan that is more than the amount of your total cost of attendance.

Direct Costs: This is what HAS to be paid in order to be an enrolled student at a college. Usually this balance must be paid off before a college will allow you to enroll in classes the following semester. Examples include tuition, fees, and room and board (if you live on campus).

Indirect Costs: An estimated amount the college predicts you may need to pay as an enrolled student on their campus. Because a student can never take out a student loan beyond the amount of the COA, the indirect costs are figured in to assist any student that cannot pay for these expenses out-of-pocket (and thus need to take out a loan to cover the cost). Examples include books, supplies, transportation, personal expenses, and miscellaneous expenses. A student can still enroll in classes for the following term without these items being “paid for.” They are just suggested amounts in order to help the families better prepare.

Private Scholarships: Money you’re being given because you applied and received a scholarship through a program or organization. This is money you will not have to pay back.

Institutional Scholarships/Grants: This is also money you do not have to pay back. It is money that has been awarded to you by the college, and it can be based off of a number of requirements, such as GPA, intended major, athletics, etc.

Expected Family Contribution (EFC): This is the amount your school believes your family is able to contribute toward your college education. Usually this amount is based off of information from your FAFSA.

Loans: Money that is borrowed to pay for college that you must pay back (plus interest) once you have graduated or if you ever drop below part-time status.

Grants: Money that’s being given to you that you do not have to pay back. This funding can come from the college, the state, or a federal program.

Work-Study: The amount of money you’ll receive toward your college costs in return for working on campus. This money must be earned in order to receive it.

Total Award: The total amount of money you’re receiving in financial aid through loans, grants, scholarships, and work study.

Financial Need: This is your “gap” in financial aid. In other words, this is your COA minus all other financial aid, otherwise known as the money you and your family will have to pay out-of-pocket to cover the remainder of your expenses.

Questions to Consider before Accepting Your Financial Aid

– For the EFC, do my parents/guardians really have this amount to put toward my education? If not, then you’ll have to add this amount to your out-of-pocket expenses.

– Can I expect these grants/scholarships every year? Pay close attention to whether your “free-money” is renewable (received every year), or it is a one-time award. If you are being offered one-time awards, will you able to pay for this school in subsequent years?

– Will I be able to maintain the requirements needed to keep this scholarship?

– Am I able and willing to work on campus through a work-study program in addition to going to school?

If upon reviewing your award letter, you discover you still don’t have enough money to pay for college, there are a few options you can take. You can apply for private student loans through a bank, look into tuition payment plans, or apply for more scholarships on Cappex.

If you still have any additional or specific questions regarding your award letters, be sure to reach out to the financial aid offices of your colleges and universities.

Image credit: fortscott.edu

Original Post Date: April 14th, 2014

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