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how to read your financial aid letter

When you apply for financial aid to attend a prospective college, you will likely receive a financial aid letter, also known as a financial aid offer, around the same time you receive the acceptance letter. These letters provide important information about how a university’s financial aid can help you with the college tuition. Although each college sends out its own unique letter, there are some common components you will see in letters to help you compare each financial aid offer.

Components of a Financial Aid Letter

Even though schools craft their own letters, they usually have the same components and concepts in each of them.

  • Cost of Attendance (COA). This is the estimate of what the school charges for one year of attendance, which includes tuition, fees, room and board, books, supplies, food, transportation, and other expenses.
  • Expected Family Contribution (EFC). This is another estimate by the university to determine how much financial aid you can qualify for. This number is obtained from numerous factors, such as the family’s taxed and untaxed income, benefits, assets, family size number, and how many people in the family will be attending college at a given time.
  • Net Cost. The net cost, sometimes known as the net price, is the difference between the COA and the scholarships, grants, and education tax benefits.
  • Gift Aid. Money the university offers that you do not have to pay back. Some of these gifts include grants, waivers, and scholarships. You may receive this aid depending on needs or merits.
  • Federal Pell Grant. This is the largest federal grant awarded, usually to low-income students. How much you receive from this program depends on several factors, such as the size of the family and income, and how much financial need is reflected in FAFSA.
  • Federal Work-Study. This program allows students to work on federal, state, or university-hosted and funded jobs to pay off at least part of their tuition. Work-study jobs usually take place inside campus and are limited to 20 hours per week.
  • Stafford Loans. These student loans are common in most financial aid letters. There are both subsidized and unsubsidized versions. The former has the government pay the accumulating interest while the student is enrolled, while the latter does not. Unlike gift aid or work-study, you will have to pay student loans back after graduation.

Comparing Financial Aid Awards

If you receive financial aid letters from several schools, you may need to compare their financial aid benefits to decide which school’s financial aid package is the best option for you. Determine which school to choose by following these steps:

  • Calculate the school’s COA for the semester
  • Subtract gift aid money from grants and scholarships
  • Subtract earned money from work-study programs
  • Subtract money borrowed from student loans
  • The result should help you decide on the best program

Seek Further Assistance

If you are unsatisfied with the amount of financial aid you receive, or you have any other question about the financial aid letter, always consult the school’s financial aid office. You can always appeal to receive additional aid, and the office staff will always be there to answer questions and clear any doubts.

Additional Resources:
https://www.salliemae.com/college-planning/financial-aid/financial-aid-award-letter/
https://www.usnews.com/education/best-colleges/paying-for-college/slideshows/10-things-to-know-when-reading-your-financial-aid-letter
https://www.nerdwallet.com/blog/loans/student-loans/understanding-financial-aid-award-letter/