Making sense of financial aid award letters can be a daunting task for families as they make college enrollment decisions. Schools don’t use a standardized form for awarding financial aid, so comparing financial aid offers from multiple colleges isn’t always easy. Use this guide to compare your awards & come up with a plan to pay your tuition bill.
- Add up your direct costs. Direct costs are costs paid directly to the school such as: tuition & fees, room & board and other fees. Books, travel costs, personal expenses and other miscellaneous costs, while they add to your total cost of attendance, are considered indirect costs.
- Calculate your total gift aid. Gift aid is free to you and includes grants and scholarships. The first step to comparing award letters is to sum up your total gift aid. Subtract any gift aid from your total direct costs. Do not subtract work-study or loans from your total costs since these are considered self-help aid.
- Consider what savings you have available to help meet tuition costs. Do you have a 529 college savings plan or a Coverdell savings account? Any other savings or gifts meant for college? Subtract any resources you will use from your direct costs.
- Determine if you have any income available to help pay college costs. Most colleges offer a payment plan that allows you to spread out the cost of tuition over the course of a school year. Typically, a payment plan administrator charges a one-time enrollment fee. Be aware that making payments late can result in high fees. Contact the college Bursar’s office or Financial Aid Office to get information regarding payments plans. Some popular plan administrators are Tuition Management Systems (TMS), Academic Management Systems (AMS) and FACTS.
- Add up federal student loans. If federal student loans, including the Direct Stafford and Perkins loans, are included in your financial aid award, decide if you would like to accept these awards. Remember, you will have to pay interest on loans so you want to borrow as little as possible. Make sure you understand the terms of these loans before accepting them. Subtract the amount of Perkins and Stafford loans you will accept from your direct costs.
- Think about how you will meet the difference. The remaining balance may be higher than your Expected Family Contribution (EFC). Most schools are not able to meet 100% of your financial aid eligibility. Some schools may include the Federal PLUS Loan in your financial aid package. Keep in mind that you can apply for this loan regardless of whether or not it is listed on the financial aid award letter and you don’t have to accept it just because it is included. If you plan to borrow, whether it is a PLUS loan, state-based loan, or private education loan, remember to be a good consumer and explore rates (APR) and terms. Factor your borrowing into the whole picture when determining which aid package is best for your family.
- Subtract any additional loans you plan to borrow from your direct costs. This includes PLUS loans, statebased loans and private education loans (remember to be careful to compare rates, terms and fees for any of these options before signing the note!). Make adjustments if you still have a balance due.
- When comparing award letters, focus on the ratio of gift aid to total aid received. It is easy to get swept away by a big financial aid offer. But remember, it isn’t always the total award amount that is most important. Pay attention to how much of your financial need each college met and how they meet your need. The higher ratio of gift aid the better. Also, figure out if awards are renewable. Be wary of scholarships and grants that are only good for your first year.
- You do not need to accept the financial aid package as is. Loans need to be paid back with interest, so try to limit the amount you borrow by reducing your award amounts or declining loans if you don’t need them. If you think you need more aid, you can always try to appeal the offer. Make sure you have documentation to support your request. Many schools will take a second look at the award package, if asked.
- Send in award acceptance forms by the deadline. If you do not, the aid awarded to you may go to another student.
Need to know more about borrowing for college? Download our guide for a list of questions to ask, pitfalls to avoid, and methods on borrowing responsibly.