College Fundamentals: Understanding Your Financial Aid Award Letter


This article was written by BE Smart Contributor Chelsea L. Dixon, M.S., M.A.T.

It’s getting close to that time of year when colleges and universities will be sending financial aid award letters to students they have accepted for admission. The award letter explains all the aid that a school is prepared to offer a student, including a combination of federal grants, loans, work-study, and any state or institutional aid (including scholarships and merit aid). Grants and scholarships, also known as “gift aid,” are funds that you do not need to repay unless you withdraw from the school. Loans, on the other hand, must be paid back, with interest, upon graduation or leaving college. Work-study offers students part-time jobs.

The award letter will break down the aid offered by each semester and by overall amount. However, this is where the similarities between institutions often end. For example, cost of attendance (which comprises tuition and fees, room and board, books, and other expenses) and Expected Family Contribution (a formula used to determine your family’s ability to contribute) may or may not be included in the award letter; or perhaps an institution may not clearly differentiate between a grant and a loan. Since there isn’t a standard format, deciphering the offers may be a bit confusing.

Keep the following in mind when comparing financial aid award letters:

Cost of Attendance (COA) — It is important to know this figure. In general, the difference between COA and the aid awarded equals your financial need. Grants and scholarships are “free money” that will lower your net costs. Once you have determined your net cost, you will get a sense of whether or not the aid offered will leave you with an unmet financial need.

Understanding the terms — Don’t assume that your financial aid award will remain the same throughout your college career; awards are offered on an annual basis and can change from year to year. Many scholarships are front-loaded: You receive a more generous aid package your first year. Also, some scholarships may be given only in your first year, while others may be contingent on your maintaining a minimum grade point average.

Ask questions – If there is something you don’t understand in the award letter, contact the financial aid office. Don’t sign or agree to anything you don’t fully understand.

The Award Letter

Inform your chosen school of the aid you are accepting or declining. You must also inform the financial aid office of any outside scholarships you have received. This is important because the aid you receive cannot exceed the cost of attendance and financial need; failure to report any additional aid could jeopardize your financial aid package.

Chelsea L. Dixon, M.S., M.A.T., is founder and CEO of GamePhox Unlimited L.L.C.  A motivational speaker, Dixon is also the author of Bridging the Gap: A Simple Guide to College. She earned a B.A. in sociology from Boston College, an M.A.T. in secondary education from Trenton State College (now the College of New Jersey), and an M.S. in sports management from the University of Massachusetts — Amherst. Learn more about her at www.gamephox.com or www.bridgingthecollegegap.com.


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