Understanding financial aid award letters
You thought writing the college application essays and filling out the federal financial aid forms was difficult. Now comes another challenge: deciphering financial aid award letters.
The letters, which detail the financial assistance the school is offering, are starting to arrive in droves, along with college acceptance letters. However, not every school uses the same format, jargon and context, making the award letters difficult to compare.
A 2018 analysis of more than 500 aid award letters by New America, a nonprofit think tank, found numerous ways the letters differed. More than a third of the differences include cost of attendance information alongside financial aid amounts, according to the report. It recommended several bars financial aid offers must pass, including listing the price of admission, separating loans from grants, and standardizing terms and formatting. While there’s been progress in standardizing the financial aid letters, differences still abound from school to school.
“It’s difficult for students and their parents to do a one-to-one comparison of financial aid award letters, let alone multiple offers,” said Anna Helhoski, student loan expert at NerdWallet. “That puts the onus on families to parse through the awards and find the financial aid types and amounts awarded, as well as the total cost of attendance. (For the full report, go to https://www.newamerica.org/education-policy/policy-papers/decodingcost-college/).
Here is some award-letter advice and mistakes to avoid from Helhoski and other financial aid experts.
The award letter should include a list of all the loans and scholarships and the amounts being offered, including federal, state and money coming from the university, and work-study funds.
Don’t focus solely on the amount of grants being offered in the award letter. A higher-cost college can award more grants and still be more expensive than an in-state public school that gives out fewer grants, said Mark Kantrowitz, a financial aid expert and author of “How to Appeal for More College Financial Aid.”
Don’t confuse the net cost of attending school with the net price. Net cost subtracts the entire financial aid package, including loans that have to be repaid with interest, while some schools show the net price, which subtracts just the free money, such as grants, scholarships and other forms of aid that don’t need to be repaid like a student loan.
When comparing offers, make sure it’s an apples-to-apples comparison, which can be tricky. Some schools list only the direct costs — like tuition and room and board. You want to know the full costs of attending, including textbook, transportation costs and personal costs. If the numbers provided in the award letter are unrealistically low or don’t cover all the extra expenses, personalize these costs by using calculators and budgeting tools on the college’s website.
If a scholarship is awarded, don’t assume it is for all four years, said Billie
Joe Weis, client service manager with Chicago-based My College Planning Team. Ask if the scholarship is renewable, she said, and if so, what are the conditions for renewing it.
Likewise, understand that the entire aid package for the first year may not be identical for the remaining years of school. Some schools make their best scholarship offers for the first year, but replace scholarships with loans in the following years.
If your family has unusual financial circumstances or financial setbacks, appeal to the college for additional aid. Be prepared to provide the financial aid office with documentation. Unusual circumstances could include the loss of a job, unexpectedly high medical bills or the death of a wage earner in the family.
The takeaway: The financial aid award letter is not set in stone, Weis said. It is not the college’s final offer, and if you come up short, appeal for more aid.