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5 Things You Should Know When Evaluating A Financial Aid Offer

Many colleges use the term “award letter” which can be misleading and make it sound like all the aid that is listed will all be awarded to you – look again! This notification is an offer that can be paper or electronic and you are not obligated to take all the aid you are eligible for and you should review the offer and know what you are agreeing to before committing.



Financial aid packages can be confusing because every college uses their own forms and terminology. Your understanding how to interpret a school’s financial aid offer letter is an important financial decision-making moment that can impact your financial situation for years to come. Be sure that you can answer the 5 questions below before you make any decisions on how to pay for college:




1. What is the total cost?

The Cost of Attendance (COA) is the total estimated cost that includes both direct and indirect expenses. Direct costs like tuition, housing and a meal plan, if you plan to live on-campus, will be paid directly to the school. Most people just think of the cost to attend and forget about the other costs. Other estimated personal and educational expenses such as books, labs, transportation and other living expenses are your responsibility and are sometimes referred to as indirect costs.



2. How much will you actually have to pay?

This is sometimes referred to as net cost or out-of-pocket cost. This is the remaining amount after grants and scholarships are subtracted from the total cost. This includes any loans, money paid directly to the college, and additional personal and educational expenses paid throughout the year. Pay attention to how schools show loans in the offer. It may appear they are reducing what you will have to pay, but keep in mind that they will have to be paid back later.


3. How much “free money” has been awarded?

Grants and scholarships are financial aid funds that do not have to be repaid and may be considered an award. These funds can be need-based or be based on performance or affiliation. Each grant and scholarship may have specific requirements to maintain eligibility. Gift aid, which is what it sounds like it is a gift, it’s free money. They can call it a lot of things, a scholarship, a grant, an endowment, a tuition waver, a tuition reduction. The bottom line is you don’t have to pay it back.



4. Is work-study considered an award?

Work-study is a federal program that’s considered self-help aid that schools administer to provide students part-time jobs, but it’s not a guarantee. You will need to find an eligible job and work in order to earn the money. The full amount is not awarded up-front so work-study compensation won’t help to pay expenses that may be due at the beginning of an academic period.



5. Is the best financial aid offer one that shows $0 dollars owed?

Financial aid offers will most likely include loans of varying types. Loans are borrowed money that you must pay back with interest. Some loans, like Parent PLUS need to start to be repaid immediately. Taking the time to understand your financial aid offer can have long-lasting benefits as you pursue higher education. Student loans are a vital source of financing for students and if managed appropriately, can be a worthwhile investment. If you are still unclear about the terms of your financial aid offer, its recommended that you reach out to the school and ask for clarification or we can dissect the offer for you. We also have unique solutions to show you how to pay for college.

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