Understanding and Evaluating a College Financial Award Letter in Five Simple Steps

Understanding and Evaluating a College Financial Award Letter in Five Simple Steps

College applications are submitted, and decisions are coming in. What’s next? Financial Aid Award Letters.

Navigating the financial side of college admissions can be overwhelming. Once acceptance letters are received, the next step is to review carefully the financial aid packages offered by each school. Award letters are often overly complicated and, to make matters worse, they may vary significantly from one institution to the next. Understanding the details is essential for making a well-informed decision. 

💡Expert Tip: At most colleges, people rarely pay the advertised sticker price. However, even with need-based and merit aid, private colleges usually have higher costs of attendance than in-state public institutions.

💡Expert Tip: Ivies and most other highly-rejective institutions only provide need-based aid.

 Five Steps to Evaluate Your College Financial Aid Award Letters

ONE: Understand the Components of the Award Letter

Award letters typically include a mix of grants, scholarships, work-study opportunities, and loans. Familiarize yourself with the terms:

• Grants and Scholarships: These are forms of financial aid that you don’t have to repay. Pay attention to whether they are renewable each year and any conditions for renewal, such as maintaining a specific GPA.
• Work-Study Programs: This involves part-time employment opportunities for students, typically on campus. Consider the hourly wage, the number of hours per week you’re expected to work, and whether this fits with your academic commitments.
• Loans: Federal and private loans require repayment. Check the interest rates, repayment terms, and whether the loan is subsidized (i.e., interest doesn’t accrue while in school) or unsubsidized (i.e., interest starts accruing immediately).

For additional information on grants, scholarships, loans, work-study, and other topics related to financial aid, click Financial Aid Demystified.

💡Expert Tip: Carefully distinguish between student and/or parent loans and grants.

TWO: Calculate the Net Cost

The net cost is the amount you will need to pay after subtracting grants and scholarships from the total cost of attendance (COA). COA includes tuition, fees, room, board, books, and other personal expenses. Use this formula:

COA – (Grants + Scholarships) = Net Cost

Compare the net cost across schools to determine which offers the best value.

💡Expert Tip:  Ensure college is affordable by considering the total cost of attendance and then extrapolating it over four years, accounting for inflation and any other expenses not quantified in an award letter (e.g., travel, winter clothing, computer, and other costs anticipated). 

THREE: Consider Out-of-Pocket Costs and Loans

Beyond the net cost, analyze how much you and your family will need to pay directly. Assess:

• The proportion of the award covered by loans versus grants/scholarships.
• Long-term loan repayment obligations. Use a loan repayment calculator, such as the one found HERE, to estimate monthly payments after graduation.
• Additional fees or expenses not covered by the award, such as travel, health insurance, or technology costs.

 Loans lower the institutional bottom line, NOT the students. If Parent Plus and/or private loans are included in a financial aid “package,” ask yourself questions such as, “Should parents delay retirement?” and “Should young people take on excessive debt to attend an institution that essentially offers the same product as State U?”

 💡Expert Tip:  Loans are “use or lose” by year. Make sure you take loans each year if there are not sufficient funds available to pay for all four years of college.

FOUR: Consider the Big Picture

Think beyond the first year. Many awards are structured differently for subsequent years. Questions to ask include:

• Are grants or scholarships renewable? If so, under what conditions?
• Is tuition likely to increase in the coming years? Will your financial aid package adjust accordingly?
• How will your family’s financial situation affect future aid eligibility?

Additionally, consider how each school’s financial offer aligns with its academic, social, and career opportunities. Sometimes, the "best" financial package may not come from the "cheapest" school but from the one that offers the best overall fit for your goals. For example, if you want to be a nurse, ensure the college has a nursing program.

FIVE: Consider a Financial Aid Appeal

There are circumstances in which an appeal is appropriate. Generally, an appeal is worth a shot at private colleges when an award is less than reasonably anticipated or something has changed in a family’s circumstances. If an appeal is appropriate, present a sound case; the worst thing that can happen is they say “no.”

Strong candidates for appeals are those with changes in circumstances, including retirement distribution, severance payments, separation, divorce, remarriage, unemployment, illness, death, better offers from competing colleges, and business ownership. Additionally, twins may have some luck with an appeal.

💡Expert Tip: Appeals should come from the student, not the parents, and should indicate that the institution is unequivocably the student’s number one choice.

💡Expert Tip: Colleges don’t care how, when, or if people retire. An appeal based on funds earmarked for retirement or a desire to avoid loans will likely fail.

Final Thoughts

Evaluating financial award letters is a critical part of choosing the right college, and students should feel entitled to contact the financial aid office for clarification on any aspect of the letter. By taking the time to compare offers and project long-term costs, students are empowered to make informed decisions that set them up for success—academically and financially.

Tune in next week for step-by-step instructions on how to write a compelling financial aid appeal. For more information on evaluating college financial award letters or anything related to the college admissions process, reach out at kathy@fineeducationalsolutions.com.