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How To Understand Your Financial Aid Award Letter

Posted by Manuel Fabriquer on Thu, Feb 19, 2015 @ 10:50 PM
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When you receive your letter of acceptance to a college or university, included in that packet, or arriving soon after, should be your anxiously awaited financial aid award letter. This piece of paper includes the information which will let you know how much the college experience will be costing (or not costing) you and your family. While award letters are full of information and numbers, they can often become a confusing jumble of data that the recipient struggles to fully understand. What’s the difference between a grant and a loan? What does unsubsidized mean? Today we break down some of the mystery surrounding your financial aid award letter.


Deciphering the Language
To start with, let’s define some of the common financial aid terminology you’ll likely encounter.
➔    Grant: A grant is money given to the student, whether from the university or through the federal government (such as in the case of the Pell grant). Grants are typically based on financial need.
➔    Scholarship: Need-based or merit-based, scholarships are also money given to the student, but often come with certain requirements, such as the student maintaining a certain GPA.
➔    Unsubsidized/Subsidized: You may see these words alongside “Federal Direct Loan”. These loans are from the federal government and must be repayed. Subsidized loans have their interest paid by the government while you’re in school at least half time, for 6 months following graduation, and during periods of deferment. For unsubsidized loans, you are responsible for repaying all interest.
➔    Work study: Work study is a federal program which allows students to obtain employment on campus to assist with the expense of cost of attendance.


Sifting Through the Numbers
You’ll want to proceed with as much information as possible before accepting or declining any part of the financial aid award letter. Some things to keep in mind:

- Some schools “frontload” their grants for freshmen. This means that the school offers more money to first year students, gradually reducing the grant amount in subsequent years. This can be a problem when estimating college costs. Ask the college or university directly what their policy is on this, or even seek out current upperclassmen and ask them about their grant amounts over 4 years.

- Work study is an optional program for students. Working at a work study job won’t pay the costs of tuition or fees, but instead, the student can earn money to assist with living expenses. These positions are coveted in the college environment, so if you’ve been offered federal work study, apply for positions on campus as soon as possible. 


Completing the Calculations
When a university gives you an award letter, they typically include all money you are eligible for, in the form of grants, scholarships, work study, and loan options. These amounts can be compared to the school’s total “cost of attendance” or COA. The COA includes not only tuition and fees and housing costs, but usually takes into account estimated costs such as food, transportation, books, and supplies. As you go through your award letter, you’ll need to research a few different things. Before signing up for any loans, make sure you fully understand the terms of the loans and find out any associated interest rates. This can help you determine if loans are the right option for you and your family, financially. It’s good to remember, too, that while you’ll be paying the school directly for tuition and fees (and typically for room and board as well), aside from that the COA can vary greatly dependent upon many factors. Transportation costs, for example, will be greater or lesser than estimated depending on how often you’ll be traveling to and from the university and how far you’ll be going. Books and supply costs can also range dramatically according to your choice of major. You may want to make a budget and layout estimated costs of your own with your family to determine the true COA.

Tags: strategies for college, financial aid award, college applications, attending college