If you are like most students, financial aid will play a large role when you are deciding what college you will attend in the fall. If you have not received financial aid award letters from the colleges that sent acceptance letters, you will be receiving your award letters soon. Unfortunately, financial aid award letters can be confusing for students, especially if you are an incoming student who will have to compare award letters from several colleges.

A common mistake many students make is thinking the college that offers the biggest “award” is the best financial aid award. However, this is not always the case. Below are some tips to help you understand and compare your financial aid letters so you can make the best educated decision when choosing the college you will attend in the fall.

Cost of Attendance

You need to understand the cost of attendance. Cost of attendance is how much it will cost to attend the college for one year. Some colleges will include their cost of attendance on their award letter, while others will not. If not, seek out the cost of attendance for the academic year you will be attending by reviewing the website or contacting the institution.

Cost of attendance includes the following items:

• 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 you should focus on should be the direct cost of attendance – the amount of money that will need to be paid directly to the college. Direct cost will include tuition, required fees, and room and board if you are living on campus.

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

• Federal Grants. Pell Grant, FSEOG, etc. Federal grants are need based and you can only qualify by filling out the FAFSA.
• State Grants. Check with your state to learn about the specific state grants that are available. Most programs are need based and you must submit the FAFSA. Some states may also require additional documentation.
• Institutional Grants and Scholarships. Most colleges have their own grants and scholarships they award students, including scholarships based on merit, talent, demographics, or need.
  • Merit Scholarships. Awarded solely on your GPA and/or test score. These scholarships are typically renewable, but students will need to meet a specific GPA every semester to keep the scholarship.
  • Talent Scholarships. Athletic, musical, debate and other talents can possibly be awarded a scholarship. Some scholarship programs are one-time awards, while others are renewable based on participation in the program at the college.
  • Demographic Scholarships. You may see a scholarship on your award letter that is based on something about you. For example, some colleges have legacy scholarships for students whose parents attended the institution. Or, you might receive a scholarship if you are a first generation college student (first in your family to attend college). Visit the financial aid websites to learn about the scholarships that are available to students at the colleges you are considering. Some of these scholarships are one-time scholarships, while others are renewable.
  • Institutional Grants. After the other scholarships and grants are applied to your award, there still may be a gap in your financial need (Cost of Attendance – Expected Family Contribution = Financial Need). The colleges may add extra money to fill the gap.

Direct Cost of Attendance – Free Money = Total Out-of-Pocket Cost

The out-of-pocket cost may seem like something your family can afford. However, make sure you keep in mind that you will need to multiple the amount by four (for your four years of college). Does the amount still seem affordable for your family?

Your financial aid award letter will also list loans and work-study as awards. However, you must remember you must pay the loans back. And, if you are offered work-study, you will have to work to receive the money. Some of the programs you will see on your award letter may include:

• Federal Subsidized Loan. Low interest rate loan you will not have to start paying back until after you are out of school. The U.S. Department of Education will pay the interest on the loan while you are in college.
• Federal Unsubsidized Loan. Similar to the subsidized loan, but interest will accrue on the loan while you are in school.
• Direct PLUS Loan. Loan program offered to parents. Parents will need to apply for this loan. If they have adverse credit history, they may not qualify. If your parents do not qualify for the PLUS Loan, you may be offered more federal unsubsidized loans.
• Work-study. You must work to receive this money. Many work-study jobs will be on-campus, but there may be off-campus positions as well. Just like other jobs, you will still need to seek out positions, send in your application, and be interviewed for the job.

The loans that are offered on financial aid award letters are good options for students and families to consider. The interest rates are typically smaller than private loans and students do not need to pay back the loans until they have left college. However, many students make the mistake of taking out too much student loan debt that they will not be able to handle. Therefore, when taking out loans, keep in that the amount of loan you take the first year will be similar or possibly more the following years! Do you still think you will be able to handle the debt?

There are also questions you will need to have answered before making the best financial decision. Some colleges will include all of the answer with the financial aid award letter, while others will not. Get your answers before committing to a college. Below are some questions you will need to ask to fully understand your financial aid award:

• Will I be able to meet the requirements to renew scholarships? Need based financial aid is usually renewed as long as you submit the FAFSA and other required documentation every year. However, scholarships offered by the colleges usually have requirements to renew. For example, to keep your merit scholarship every year, you will need to have a certain GPA. If you received a talent scholarship there will probably be specific participation requirements. Do you believe you will be able to meet the requirements for renewal?
• How does the college view outside scholarships? You must notify the college of any outside scholarships that will be coming your way. Colleges have different procedures when it comes to outside scholarships. Some colleges may reduce institutional grants if you have an outside scholarship. Other colleges may decrease loan amounts. Don’t assume your outside scholarship will be added on time of your financial aid award. Learn about each college’s procedure for outside scholarships.
• Will financial aid increase as cost of attendance increases? The cost of attendance is very likely to increase during your time at the college. Will aid also increase? Some colleges will increase aid, while others will not.
• Can you receive additional institutional scholarships after your first year? Some merit scholarships are locked in based on your high school grades and test scores. However, what happens if you do exceptionally well during your first year of college? Is there the possibility of more aid? Is there other scholarship opportunities once you become a student? Check with the financial aid office for more information.
• Does the financial aid award seem right? Does your EFC seem too high? Is there something the FAFSA did not take into account? Is there a scholarship the college advertises you believe you met the qualifications, but it was not on your award letter? Or, does your award letter seem especially low compared to other colleges? If you have any questions or concerns about your financial aid award letter, contact the financial aid office. Mistakes can happen! In addition, you may qualify for special circumstances for the things you were not able to explain on the FAFSA.

Financial aid is probably going to be the determining factor when you ultimately choose the college you will attend in the fall. Study your financial aid awards to learn how much it will actually cost to attend each of the colleges you are considering. And, be honest with yourself when determining what you and your family can afford for your education.

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