Breaking down the financial aid award letter

financial aid

By Suzanne Shaffer

It’s a joyful day for your high school senior when an offer of college admission arrives, and the joy is magnified by a financial aid award.

Award letters arrive along with (or soon after) acceptance letters. I remember the first time I saw one, my daughter’s senior year. Quite honestly, it was Greek to me.

How were we supposed to compare the offers? The letters included the same basic categories — loans, work-study, grants and scholarships — but without understanding what each category meant it was hard to tell whether or not the college was meeting all of our financial need (Total Cost of Attendance minus our Expected Family Contribution, or EFC). Every college was different and every award letter was different!

However, along with fit and preference, these letters played an important part in my daughter’s final college decision. We had to figure it all out. In my daughter’s case, there were three colleges that met all or most of our need, but the way they met it was very different. In order to determine which college was the best fit financially, I had to do my research. Over the years, I have become more and more familiar with award letters and their various components, and I’m happy to share what I’ve learned.

What are the key elements of an award letter?

Every financial aid award letter should contain these components:

  • The full cost of attendance broken down into expenses such as tuition, room and board, student fees, textbooks, travel
  • Grants and scholarships
  • Loans listed by type and amount, including the interest rates
  • Work-study (a federally-funded program for which your student may qualify)
  • The net amount you will pay after financial aid is deducted
  • Your EFC (Expected Family Contribution)

If a PLUS loan (Parent Loan) is listed as part of the financial aid package, this should raise a red flag. Parents can apply for this loan if they pass a credit check but PLUS loans should not be included in a financial aid award.

How do you evaluate each award letter?

Examine each of the above components one by one in order to break the award letters down for simple comparison.

Step 1

Before you begin, determine the school’s real cost of attendance. Every college in the United States is required to include a Net Price Calculator on their website to provide an estimated cost of attendance. If you want to be thorough, you should look at other calculators as well. You can use or to gather more information and compare net price calculators. With these figures in hand, examine each letter closely to make sure the COA reported on the letter matches the figures you have researched. If there is a discrepancy you may want to contact the college for clarification.

Step 2

Look for the free money in the form of grants and scholarships. This money can come from the federal government, state government and the colleges themselves. It’s “free” money because your student will not have to repay it after graduation. Institutional grants and scholarships are the merit aid that the college is offering in order to attract your student. It’s not only free money, but also an indicator of how interested they are in having your student accept their admission offer.

Step 3

Take a look at the loans offered in the package. As stated previously, colleges should not list PLUS loans in the letter. Since all loans have to be repaid, check loan repayment calculators before accepting them.

There are two types of federal student loans: Stafford Loans (subsidized and unsubsidized) and Perkins Loans. Perkins Loans are awarded to students who demonstrate an exceptional amount of financial need. Stafford loans are offered to students who demonstrate some financial need and colleges use them to supplement the package when the other forms of aid do not cover a family’s entire demonstrated need. Subsidized loans offer deferred interest while your student is in college; unsubsidized loans accrue interest while your student attends.

If you are seeking private loans to supplement the unmet need, which I do not recommend, compare the interest rates. These private loans tend to be less forgiving when it comes to deferments and have higher interest rates.

Step 4

After examining the information carefully, you can take the true cost of attendance, subtract the grants, scholarships and loans, and determine what your student will pay to attend the college. The best aid packages are heavily weighted with grants and scholarships. One of the colleges my daughter considered met our need with grants and student loans. The college she chose offered a better aid package, meeting our need with grants, scholarships and work-study.

Many colleges use the new Financial Aid Shopping Sheet created by the U.S. Department of Education to make it easier to understand the financial aid award. This sheet includes all the information you need to evaluate an award. If the college your student is considering does not use this sheet, you can print your own blank copy and transfer the components of the award letter to the sheet.

One of my favorite “college money” sources is The College Solution blog. One post provides screenshots of actual award letters and makes comparisons: Are These Financial Aid Letters Misleading?

What isgappingand how should it affect your decision?

Colleges often “gap” students when offering admission. A college will do this when they don’t want to back up their offer of admission with financial aid. Quite simply, the college doesn’t offer enough aid to cover the difference between the Cost of Attendance and your Expected Family Contribution.

This often happens when a student is at the bottom of the applicant pool. My daughter’s first choice college gapped her and it was clear that, although they offered admission, they did not expect her to accept because of the financial burden it would place on our family. They were right. She chose a college that offered merit aid to meet our need, communicating their strong desire to have her as a part of their college community. If you see that a college is gapping your student, consider the other colleges who back up their admission offer with a good financial aid package.

What other information should you consider?

Pay close attention to the scholarships and grants offered. Colleges often neglect to provide relevant information about the requirements necessary to keep the money throughout your student’s college career. If it’s not clear whether the awards are renewable or if the scholarships have specific criteria such as an expected GPA, your student should contact the Financial Aid Office and ask. Colleges reevaluate award packages every year so it’s important to know if your student will receive the same package each year he attends.

After comparing awards, how do you choose?

In our daughter’s case, after the excitement of being accepted to her dream college, the award letter from that school was a crushing blow. For us, the choice came down to finances. While the award is not the only factor in your decision, for families who need financial assistance, it will be critical. That’s why the “Money Talk” is so important in the years leading up to college application season. Knowing what you can and cannot afford will make it easier to formulate a final list of good fit colleges and help you avoid the disappointment of a poor award letter.