Making Sense of Those Financial Aid Award Letters

FAFSA help

BIG Ideas:

  • Financial aid award letters may vary from school to school, but all should help you determine the amount you will owe for each school.
  • Ensure you understand the difference between gifts, such as grants and scholarships versus loans, which you have to repay.
  • The award letters you receive will help you compare schools based on the net price (the cost of tuition minus the aid you receive). Remember that the most expensive school isn’t always the best choice.

College applications complete. Check.

Free Application for Federal Student Aid (FAFSA) done. Phew!

Acceptances received. YES! 

There’s a very important reason you had to complete that FAFSA: the schools you apply to will use that information to send financial package award letters outlining the types of help you can receive.

Letters and financial aid packages will vary from school to school, but each one should give you the same critical piece of information – what your bill will be.

Unfortunately, because there’s no standard format for these award letters, they can sometimes be very confusing. Don’t worry, we’ve put together this cheat sheet to help you make sense of it all:

Common items found in a financial aid award letter

Though each school has its own way of formatting its financial aid package letters, you can expect to see the following important information:

  • Cost of attendance (COA). This is the cost for one academic year of school, including the estimated tuition and fees, room and board, books and supplies, transportation, and even some personal expenses for a full-time student. If the COA isn’t included in your financial aid award letter, contact the financial aid office or visit your financial aid portal.
  • Expected Family Contribution. While this sounds like the amount your family will have to pay for college, it’s actually an index calculated by law to help you determine the amount of financial aid you could receive.
  • Grants.Sometimes referred to as “free money” because they don’t need to be repaid, grants may be awarded by schools or state and federal governments. If you receive a grant award letter and accept the grant, ensure you understand the terms and conditions to know what’s expected of you.
  • Scholarships. Scholarships can be awarded by schools, companies, non-profits, or private organizations based on need, merit, or some type of interest. Students often wonder. Do you have to pay back scholarships? The answer is no, but just make sure you understand the terms and conditions of any scholarship you accept to know what’s expected of you. In particular, pay attention to if a scholarship is a single-year award, or does it continue into future years of school.
  • Federal Work-Study. With this type of aid, you can work for the school to earn money to pay for the COA. You won’t have to actually pay back the money, just get to work!
  • Federal Student Loans. Provided by the federal government to cover the COA, these non-credit-based loans must be paid back with an interest rate set by the federal government. There are two types of Federal Student Loans: A subsidized student loan is one in which the federal government pays the interest on your loan while you’re in school, and an unsubsidized student loan is one where your interest will accrue while you’re in school. The financial aid package also may include the amount parents can borrow with a credit-based Federal Student loan, such as a Federal Direct Parent. Or, if you’re a graduate student, you can borrow with a Grad PLUS loan. These are also interest-bearing loans that must be repaid.
  • Private student loans. Offered by private lenders, these credit-based, interest-bearing loans can be used to cover the COA. Some schools, but not all, will include private student loans that may be available to you in the award letter. Please note that schools are not required to include private student loans, but that doesn’t mean that they’re not available to you if you need additional money to help cover the COA. You’re also not required to use private student loans that could be offered to you in financial aid award letters and are free to shop around to find the best option for you. View a sample award letter.

Determining the bottom line – your bill

The difference between the COA provided by the school and the scholarships and grants you’ve been awarded (free money), if any, equals the estimated amount you will have to come up with out of pocket or that you’ll have to borrow (and ultimately repay).

Federal Student Loans should always be considered first, if available, but if those are not enough to cover the COA, private student loans can be an affordable way to fill the gap.

How to accept your financial aid award

If you’ve been accepted at more than one school, carefully compare the financial aid packages to determine the best options for your education. Remember that the most expensive option isn’t always the best one for you.

Once you’ve reviewed the financial aid packages and made your school decision, you must accept the financial aid award that the school offers. You can usually do that online through the financial aid portal.

Note that you don’t have to accept any of the aid being offered, but if you turn down any of it, you’ll have to cover the cost on your own or by some other means.

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