If you take a step back and examine the full financial aid process, from FAFSA to repayment, you’re faced with a dizzying array of information and options. Important choices, unknowable outcomes, and enough industry language and confusing acronyms to make your head spin!
Of the choices you’ll make on your college financial aid journey, one stands out as invariably important: how to understand, and choose between, your various financial aid offers – the alphabetical guide. Don’t mind us if we skip a few letters here and there.
Add up direct costs and indirect costs.
Money that you pay to the school directly will include tuition & fees, room & board and other fees. If you receive a bill for it, it’s a direct cost.
Other costs, even if they are small or unforeseen, are indirect costs. These will include books, travel, technology, and personal expenses.
Calculate your total gift aid.
Gift aid includes grants and scholarships, which are “free money” that doesn’t need to be repaid. This is an important figure, so make sure you’re hitting the scholarship pool as hard as possible and wringing every free penny you can get! Once you have a figure, subtract that gift aid from your total direct costs. Remember, we are only talk about gift aid here – not work-study or loans.
Determine your savings
Do you have a 529 plan or a Coverdell savings account? Calculate your savings, then subtract those resources, again, from your direct costs.
If you haven’t already done so, this is a good time to talk to financial aid staff about payment plans that can help to spread costs over the course of a full calendar year. How much family income can go towards covering costs?
Look at your federal student loan offer
In your financial aid award, you may see both subsidized and unsubsidized loans or just one or the other. Total those, and then remember this: if you accept this award, you will have to pay back those loans back over time, with interest. Don’t jump at a figure that sounds exciting – you want to borrow as little as possible.
Make sure you’re clear…
The terms of the loan can be confusing, so consult with the financial aid office if you have any questions. You need to know how you’ll cover the difference between your loan offer and the remaining balance, which could be higher than your Estimated Family Contribution (EFC). The Federal PLUS loan or a private student loan may cover the difference, but remember that now you’re adding to a total that will eventually require repayment.
Whatever you plan to borrow should be subtracted from those direct costs you tallied up first. Make sure you include PLUS loans, state loans, and private education loans if you’re using them. If you’re in a position that requires taking advantage of these alternate funding sources, make sure that you’re carefully comparing rates, terms, and fees to ensure that you receive the best possible deal. Are you now completely covered?
What you want to examine is the ratio of gift aid – that’s free money – to the total aid you’ll receive. Are schools able to meet your full financial need? If so, how are they doing that – what percentage of that money will require repayment? The more gift aid you can use, the better, so make sure to consider whether certain awards are renewable – do they expire after one year, or will you have the option to renew? Will you need to reapply? Make sure that you aren’t at risk of a significantly more expensive sophomore year than freshman year and if you are, know whether you’ll be able to cover those costs through other avenues, like loans or savings.
Think about acceptance
You don’t have to accept your financial aid package as-is. If you believe that the amount of aid you’ve been offered is insufficient, take advantage of the appeals process. You may need to submit additional paperwork to substantiate your claim.
Xccept your award
(We know, but A was already taken!) Make sure you don’t miss your deadline after all that work!
If you've made it to this stage of the game, you're already a financial aid pro. Know what to look for when you're comparing offers! Invest wisely now, and you’ll reap the rewards at repayment time.
Need assistance comparing your financial aid awards? We can help! Simply book your free appointment at the College Planning Center of Rhode Island.