How to Read Your Financial Aid Award Letter

What Your Financial Aid Award Letter Includes

There's no standard for what a financial aid award letter should look like, so some schools provide more information than others. Additionally, your school may call it by another name, such as a merit letter, school aid offer or financial aid package.

That said, you'll generally see the following details in an award letter:

• Cost of attendance: Your school will provide an estimate of your cost of attendance (COA) for the upcoming school year, which typically includes tuition and fees, room and board, books, supplies and other expenses.
• Expected family contribution: Based on the information on your Free Application for Federal Student Aid (FAFSA), the U.S. Department of Education will determine your expected family contribution, EFC for short. This is the amount your family is expected to contribute to your educational costs—regardless of whether or not you do or can—and is used to calculate how much aid you qualify for.
• Financial need: This is the difference between your school's COA and your EFC.
• Scholarships and grants: These may be broken down into merit-based and need-based scholarships, as well as federal, state and institutional grants. These forms of gift aid don't need to be repaid.
• Work-study: If you're eligible for a work-study program in which you work on or off campus, you may see the annual benefit and estimated number of work hours per week. Keep in mind, though, that qualifying for work-study doesn't guarantee a job.
• Student loans: You'll be able to see which federal student loans you qualify for—subsidized or unsubsidized—as well as the total amount you can borrow, the interest rate and the upfront loan fee.

Steps to Reading Your Financial Aid Award Letter

Whether you've received multiple award letters or just one, here are some steps to help you review and understand the information:

1. Identify the main components. Because colleges don't use the same format, identify the main components discussed above to get a full understanding of what you can expect, both in terms of costs and aid. If you're evaluating award letters from multiple schools, it may help to list everything in a spreadsheet so it's all in the same format.
2. Calculate the net price. Your net price or net cost is the difference between the school's cost of attendance and the value of the scholarships and grants you're eligible to receive. In other words, it's what you're responsible for paying with savings, student loans and other sources. Some schools provide this figure for you, but you may need to calculate it on your own.
3. Evaluate the expected family contribution. In some cases, schools don't include your EFC in your award letter. If this happens, you can get it by checking your student aid report on the Federal Student Aid website. If you believe it's too high, you can file an appeal.
4. Make sure all costs are included. In some cases, the estimated COA may not include all of the costs you'll incur as a student. Check your school's website or contact the financial aid office to make sure all potential costs are included.
5. Be clear about the length of gift aid. Federal grants are typically offered on a yearly basis, but if your school offers you a scholarship, it could be for a single year or multiple years. Make sure you understand what you can expect with gift aid. Also, note any conditions, such as maintaining good grades.
6. Note the student loan terms. If you qualify for subsidized student loans, that means the government will pay interest that accrues while you're in school and during future deferment periods. Use those up before moving on to unsubsidized loans. Also, use an online calculator to determine what your payments would be given the amount and interest rate.
7. Decide what to accept. For student loans, the amount you see is the maximum amount you can apply for, but you can accept a lower amount if you don't need all of it. Additionally, while you may qualify for a certain amount of work-study benefits, you may be able to get a better-paying job on your own.

How to Compare Financial Aid Awards

If you're an incoming freshman, financial aid award letters are crucial in helping you determine which school is the right one for you. As you receive award letters from each school that's admitted you, here are some steps you can take to compare them:

• Focus on the net cost. While the cost of attendance at one school may be higher, it may ultimately be less expensive for you if the college provides more gift aid than other schools.
• Understand what's included. If you receive a scholarship that covers tuition, fees and books, it could save you a lot of money compared to one that only covers tuition and fees.
• Look beyond the first year. Remember, some forms of gift aid may be offered on a multi-year basis. If you've been awarded a scholarship for two years at one school and four years at another, the latter school may be less expensive overall.
• Consider other expenses. Think about other potential costs that aren't included in a school's cost of attendance. For example, you may consider how much you can save by picking a college that allows you to live at home instead of needing to rent an apartment or live in a dorm. If you're considering colleges out of state, think about the costs associated with moving and returning home for holidays.

When Will I Get My Financial Aid Award Letter?

Schools typically send out financial aid award letters at the same time as admission offer letters, which is between February and May of each year, though some may send them even sooner.

The exact timing will depend on your school and when you submitted your FAFSA.

Also, depending on your school, you may receive the letter by mail, via email or in your student portal. Because every school has a different process, reach out to the financial aid office for more specific information.

What to Do if You Need More Aid

If your net cost is higher than what you can cover with federal student loans, here are a few steps you could take to obtain additional aid:

• Appeal your award letter. If you believe your expected family contribution is too high or your family's financial situation has changed, you can write a financial aid appeal letter. Contact your financial aid office to ask about the appeal process, and be sure to clearly explain your situation. You can also provide documentation of a recent job loss, the death of a parent or other special circumstances.
• Apply for private scholarships and grants. Using scholarship databases like Scholarships.com and Fastweb, search for scholarships and grants offered by private organizations and apply to the ones that you're eligible to receive.
• Ask your employer for help. If you're employed full time, check with your human resources manager to understand whether the company offers tuition assistance and what you need to do to qualify.
• Find a part-time job. If you're not already working, consider getting a part-time job to help supplement your other efforts to pay for school.
• Get on a tuition payment plan. Some schools offer tuition payment plans that allow students to pay the cost over the course of the semester rather than in a lump sum at the beginning.
• See if you qualify for additional federal loans. If you qualify as a dependent student and your parents don't qualify for parent PLUS loans, you may be eligible to receive additional student loans beyond the standard annual limit.
• Look into school-based loans and aid. Some schools offer short-term loans and emergency aid to students who are experiencing short-term financial difficulties.
• Consider private student loans. If all else fails, applying for private student loans may be better than withdrawing from school. While some private lenders offer student loans that don't require a credit check, their interest rates are high. Ideally, you'll have a parent cosign your student loan so you can qualify for more favorable terms.

The Bottom Line

Paying for college can be a daunting task, but it all starts with your financial aid award letter. Knowing how to read and assess your financial aid awards and compare offers from different schools can help you make better decisions about your college education and help you save money by limiting the long-term costs of student loans.