Paying for College 101: How to Decode the Financial Aid Award Letter
This is the ninth post in a series entitled “Paying for College 101: What You Need to Know about Financial Aid” by Myra Baas Smith, Executive Director of Financial Aid Services at the College Board.
After learning about the various types of federal and non-federal financial aid, we are nearing the end of our series on paying for college. This brings us to the ninth thing you need to know: how to decode award letters.
In theory, you should be able to put all your financial aid awards side-by-side and compare the cost of attendance, the types of aid and sources at each school, and see a clear bottom line. There are tools to help with this, including an award comparison worksheet at the College Board website.
The bad news is that most colleges have institutionally-specific aid award letters. Some will only show the financial aid on the award letter, but not the cost of attendance, some will package PLUS loans, some will call a grant a scholarship and so on.
How do you make sense of it all? I find the way to do this is to compare direct costs – those things you will be billed for, such as tuition, room and board – less all gift aid. You can use the College Board’s comparison worksheet to do this – just complete these items and leave the other indirect costs and self-help aid blank. This simple calculation will allow you to cleanly compare a bottom line payment for each college.
You can then factor in the student loans awarded as an option to finance the amount due or to cover all or part of personal expenses, travel and books. Don’t apply any work-study award at this point, as those funds will likely be used for spending money, not direct costs.
As noted in my last post, make sure you understand all the terms and conditions for each type of aid awarded by each college. You might want to set up a spreadsheet and note the following for each fund:
- Grant/scholarship aid: Conditions for renewal, including grade point average, number of classes per semester and course of study. Don’t assume that because you had a 4.0 in high school it will be easy to maintain the same in college. If you receive a scholarship for a certain course of study, recognize that you might change your mind and take that into consideration.
- Loans: Note if the loan is subsidized (the interest is paid while you are in school) or unsubsidized (the interest accrues while you are enrolled and is added to the amount borrowed when you go into repayment). Calculate your monthly payment after you graduate.
- Work-study: Record the wage rate and what that translates into in terms of hours per week. More than 10 would be tough your first year – although working some has actually been shown to improve student academic performance.
You should also note the college’s renewal policy and how it might impact your aid. In particular, you want to know how you reapply and what impact your grade level and cost of attendance increases will have on your aid eligibility. If you currently have a sibling who is also in college, you should ask how your aid will change when your parents only have you in college.
Finally, evaluate not only year one, but the sustainability of the family contribution, including loans, over the time it will take to complete your program or degree.
It’s like peeling an onion- the whole is the cost of attendance and each type of aid or family resource becomes a layer – you cry a bit while you figure it out, but in the end it adds flavor to your college experience.
