How to de­ci­pher your college aid award

The News-Times - - BUSINESS - By Anna Hel­hoski

With college ac­cep­tances in hand, now comes the hard part: un­der­stand­ing your financial aid of­fers.

These let­ters are no­to­ri­ous for be­ing laden with jar­gon that dif­fers from of­fer to of­fer, mak­ing com­par­i­son dif­fi­cult. But you can learn how to in­ter­pret award let­ters to un­der­stand the costs and choose an af­ford­able op­tion.

Financial aid of­fers should in­clude all of the federal, state and school aid you can ac­cess. That could mean free aid, such as grants, schol­ar­ships and work-study op­por­tu­ni­ties, that doesn’t need to be re­paid, and un­sub­si­dized and sub­si­dized federal loans, which do. If these aid types are grouped to­gether with­out ex­pla­na­tion, they can be hard to dis­tin­guish.

Your of­fer also might in­clude a par­ent PLUS loan as part of the award, but avoid us­ing it if possible. These loans have higher in­ter­est rates than loans made directly to students.

And un­like typ­i­cal stu­dent loans, only par­ents can take them on, and they re­quire credit his­tory to qual­ify.

Schools also must pro­vide the cost of at­ten­dance, but that’s not the amount you owe. It bun­dles in­di­rect costs like books, sup­plies and transporta­tion, with di­rect costs such as tu­ition, fees, hous­ing and food.

The cost of at­ten­dance is usu­ally an av­er­age, says Brenda Hicks, di­rec­tor of financial aid at South­west­ern College in Win­field, Kansas.

Things like room and board could be pricier if you opt for a more ex­pen­sive pack­age, like a sin­gle room.

Why is it so dif­fi­cult?

Schools use dif­fer­ent names to re­fer to the same type of loan.

For in­stance, one college’s aid of­fer might list a “Federal Un­sub Stafford Loan,” and an­other school’s might say “DL Un­sub­si­dized Loan.” But they’re the same thing.

Un­sub­si­dized federal stu­dent loans are the only type of federal loan ev­ery stu­dent can ac­cess, re­gard­less of financial need. They’re dif­fer­ent from sub­si­dized loans, which don’t ac­crue in­ter­est while the stu­dent is in school. Sub­si­dized loans ease costs for students, which is why they’re given to those who demon­strate need.

But among 455 college aid award let­ters, there were 136 dif­fer­ent names used to de­scribe the federal un­sub­si­dized loan, ac­cord­ing to a 2018 study by New Amer­ica, a non­par­ti­san think tank , and uAspire, a Bos­ton-based college af­ford­abil­ity non­profit .

“How can we ex­pect fam­i­lies and students to nav­i­gate this process if even the aid that ev­ery­one

qual­i­fies for is called something dif­fer­ent?” says Rachel Fish­man, deputy di­rec­tor for re­search with the ed­u­ca­tion pol­icy pro­gram at New Amer­ica.

There are two main ob­sta­cles for col­leges in stan­dard­iz­ing of­fers, ac­cord­ing to Fish­man: There’s no le­gal stan­dard for lan­guage in award let­ters, and schools use dif­fer­ent soft­ware to man­age aid.

In a push for more con­sis­tency, the U.S. Depart­ment of Ed­u­ca­tion re­cently is­sued guid­ance on what schools should avoid, such as pre­sent­ing the cost of at­ten­dance with­out a break­down. There’s also bi­par­ti­san sup­port in Congress to make aid of­fers more uni­form, in­clud­ing two cur­rent bills.

Some col­leges have tried to ad­dress the prob­lem, but oth­ers con­tinue to use the same for­mat they’ve used for years, says Brendan Wil­liams, di­rec­tor of knowl­edge at uAspire.

The financial aid of­fice at the Univer­sity of Ne­braska Kear­ney over­hauled its award let­ter last year, in­clud­ing color cod­ing each aid type and pro­vid­ing an es­ti­mated net cost. Net cost is the cost of at­ten­dance mi­nus free aid. It rep­re­sents the amount that bor­row­ers will have to cover.

De­spite the changes, fam­i­lies still often want a walk-through, says Mary Som­mers, the school’s financial aid di­rec­tor. “That’s OK, that’s our job,” she adds.

How to com­pare of­fers

To com­pare financial aid award of­fers , ex­perts rec­om­mend these steps:

⏩ Cre­ate a spread­sheet with sep­a­rate col­umns for each school.

⏩ Un­der each col­umn, start with the to­tal cost of at­tend­ing each school.

⏩ List each award type and amount.

⏩ Add all free aid to­gether first and sub­tract from the to­tal cost to at­tend.

Since you want to take all free aid first, what you have left is the amount you would need to cover with sav­ings, in­come or loans. Com­pare this bottom-line amount with other schools on the list.

You can also use tools like the Con­sumer Financial Protection Bureau’s Com­pare Schools tool or the Na­tional As­so­ci­a­tion of Stu­dent Financial Aid Ad­min­is­tra­tors’ Award No­ti­fi­ca­tion Com­par­i­son Work­sheet .

“Bottom line: I would en­cour­age peo­ple to take a long look at that let­ter, read it all, make sure they un­der­stand it and reach out when they don’t,” says Hicks.

If it’s un­clear how to ac­cept one type of aid or re­ject an­other, contact the school’s financial aid of­fice.

Associated Press

Peo­ple walk on the Stan­ford Univer­sity cam­pus in Santa Clara, Calif. Financial aid award let­ters are known to be tricky to un­der­stand due to jar­gon and a lack of clar­ity about how much you have to pay out of pocket.

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