Financial aid will play a huge role in the decision process for many students. Unfortunately, financial aid award letters can be confusing, especially when award letters look different. A common mistake many families make is they believe the largest “award” is the best financial aid award. However, this is not always the case. I’ll give you tips on how to review and compare financial aid award letters so you can make an educated decision when choosing the college you will attend in the fall.

Cost of Attendance

The cost of attendance is very important for you to understand. This is the amount of money you will have to pay for one year of attendance at the college. Some colleges will include the cost of attendance on their award letters, while others will not. If not, seek out the information on the college website or contact someone at the institution. The cost of attendance is used when determining the financial aid that is awarded to the student.

What goes into Cost of Attendance?

• Tuition
• Required Fees
• Room and Board
• Books and supplies
• Personal and miscellaneous

Cost of attendance will vary depending on whether you live on-campus, live off-campus, or live with your parents. The number students and families should focus on is the direct cost of attendance – money that will be paid directly to the college. Direct cost will be tuition, required fees, and room and board if living on campus. In addition, students can include the books and supply costs since they will be necessary for attendance, but students should reminder that this cost will vary from student to student and year to year.

After figuring out the direct cost of attendance, you will want to subtract all of the free money you will not have to pay back. After the free money (scholarships and grants) is subtracted, you will be left with the amount you will have to pay out-of-pocket to attend the college for one year. Scholarship and grants can include:

• Federal Grants. Pell Grant, FSEOG, TEACH Grant, and Iraq and Afghanistan Service Grants. Federal grants are need based and students must fill out the FAFSA to be eligible.
• State Grants. Each state has their own grant programs that will vary widely. Most states require financial need. Students will need to submit the FAFSA and some states require additional forms to be eligible.
• Institution grants and scholarships.  These scholarships and grants can be based on merit, talent, demographics, and need.
  • Merit Scholarship. Some colleges award scholarships based on GPA and/or test scores. These types of scholarships are usually renewable as long as you meet a GPA requirement every semester at the college.
  • Talent Scholarships. Athletic, musical, debate and other talents can possibly be awarded a scholarship. Many times these scholarships have requirements for students once they are at the college. For example, if students receive an athletic scholarship, they will be required to participate in the sport. If participation stops, the scholarship can be taken away in future years.
  • Demographic Scholarships. Some colleges offer scholarships based on something about you. Many colleges offer legacy scholarships to student whose parents attended the institution. There may also be scholarships for first generation college students, ASB presidents, etc. Some of these scholarships are one-time scholarships, while others are renewable.
  • Institution Grants. Colleges can choose to give scholarships for anything. In addition to the above scholarships, students may fill the gap of your financial need (Cost of Attendance – Expected Family Contribute = Financial Need).

Direct Cost of Attendance – Free Money =

Total Out-of-Pocket Cost

The total out-of-pocket cost may seem doable. However, many students and families forget they will have to multiple this number by four for the four years of college. Does it still seem doable?

Colleges will also include loans and work-study on the award letter. They will advertise loans and work-study as an award, but you will have to pay back the loans and work for the work-study.

• Federal Subsidized Loan. Students do not need to pay back the loan until the student has been out of full-time education for six months. During the time the student is in school, the U.S. Department of Education pays the interest on the loan. Subsidized loans are awarded based by financial need.
• Federal Unsubsidized Loan. Students do not need to pay back the loan until the student has been out of full-time education for six months. During the time the student is in school, interest is accruing on the loan. Students do not need to demonstrate financial need.
• Direct PLUS Loan. This loan is offered to the parents of the students. Although this loan is included on the financial aid award letter, parents will need to show they do not have adverse credit history. Parents will set-up a payment plan. If parents do not qualify for the PLUS Loan, students may be offered more federal unsubsidized loans.
• Work-study.  Work-study is another option that does not need to be repaid. However, as the title suggests, students must work to earn the money. Work-study wages are usually given to the student in the form of a check, just like a regular job. Most work-study jobs will be on campus, but there may be off-campus positions also available. Work-study jobs are not guaranteed. Just like any job, students will need to seek out jobs, submit an application, and interview for the job.

While not all loans are bad, sometimes students take on more loan debt than they will be able to handle. Many time students do this because they have a dream school in their mind and are willing to do whatever it takes to attend that dream school. Unfortunately, students enroll in colleges that are not good financial fits every year. They may try to make it work, but eventually the stress of paying for their education becomes too much for some of the students and their families. Therefore, it is very important to be honest with yourself and make sure you believe attending the college is doable financially for your family for four years. As you are considering the numbers, make sure you have the answers to the questions below:

• Can you meet requirements to renew scholarships? Need based financial aid is usually renewed as long as you fill out the FAFSA and your family income stays the same or similar. However, scholarships from the institution, such as merit and talent scholarships have requirements to renew. Do you honestly believe you will be able to meet the requirements?
• How does the college view outside scholarships? As you noticed, I did not include outside scholarship when explaining the award letter. Colleges need to know about all outside scholarships coming in. Many students believe that an outside scholarship will be added on top of other scholarships and grants. However, this is not always the case. Some colleges may decrease the amount of their institutional grants if an outside scholarship comes in. Others will decrease the amount of loans offered. Check with the financial aid office to determine how outside scholarships can affect your financial aid award.
• Will financial aid increase as cost of attendance increases? Colleges typically increase their cost of attendance every few years. Some colleges have increased their cost every year. Some colleges will adjust financial aid with the increase, while others will not. The financial aid office will be able to tell you what their policy is on increasing financial aid.
• Is there a possibility of increased institutional scholarships? Some merit scholarships are locked in based on your high school grades. However, if you were a student who did not meet the requirements in high school, but may do exceptionally well in college, is their an opportunity for a merit scholarship? Are there other scholarship opportunities once you become a student? Check with the financial aid office for information. Some colleges’ financial aid is locked in once you become a student, while others have many opportunities after you arrive.
• Does the award seem right? Does your EFC seem to be too high? Is there something the FAFSA did not take into account? Maybe you think you met the requirements for a merit scholarship, but it wasn’t on the award letter. Or, did one award letter seem especially low compared to the other college? If you have any questions at all about your award letter, contact the financial aid office with your concerns. Mistakes can happen sometimes. In addition, you may qualify for special circumstances that will allow you to provide more information for a revised financial aid award.

Take your time as you are figuring out how you are paying for college. Be honest with yourself when determining what your family can afford for your education.

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