Deciphering financial aid
Understanding higher education financial aid award letters
Congratulations — you are considering college! But first, paying for it: Students who applied for financial aid through the Free Application for Federal Student Aid, or FAFSA, should be receiving their award letters right about now.
There’s no standard format for these letters, so deciphering how much assistance you’re getting and how much you’ll pay can be very confusing.
Here’s some help:
1 Award components
Generally speaking, there are three types of award: free money, such as scholarships and grants; borrowed money, such as loans that need to be paid back; and earned money, such as work study in which you get a work study job, earn the money and don’t have to repay it.
The offer will vary from year to year.
It’s important to pay close attention to the details of each component too, urges Sallie Mae. Scholarships and work-study may be renewable or an offer for that year only. The nature of the loan may not be exactly clear either, drill down to figure out if they are federal loans, private loans or even loans for parents. The type of loan will determine the interest rate and repayment terms.
Eva Dodds, director of counselling at College-wise in Detroit, suggests having the school’s financial aid website open as you review the offer. The webpage should have a complete definition of each financial aid option they offer.
If you’re still unclear, speak to someone in the financial aid office, Dodd said. It’s their job to make sure offers are understood and fulfilled, she said. Don’t get off the phone until you understand each offer in the letter.
2 Cost of attendance
The cost of attendance, or COA, is an estimate of what you’ll pay for one year of school.
Again, there’s no standard for this so some schools may only include tuition and fees, while others estimate room, board, books and supplies as well. If the COA is not included, check the school’s website or contact their aid office. Consider additional expenses for travel and personal needs when judging your total costs.
3 Mind the gap
Sometimes there’s a gap between what’s offered in aid and the cost. Calculate this is to subtract the cost of attendance from awards, and what’s left is what you must pay. If there’s a gap, you can pay out of savings or seek a private loan to cover it. You can also reach out to the financial aid office to ask for a reevaluation. This is particularly useful when someone’s financial situation has changed.