Decoding Your Financial Aid Award Letter

The current college admissions landscape is overwhelming, filled with conflicting advice and inflated expectations. After months of hard work, opening an acceptance letter and the accompanying financial aid package should feel like a moment of pure relief. Unfortunately, colleges do not use a standard format for these award letters.

Many families are shocked to find documents filled with confusing acronyms, bundled loan offers, and vague estimates. It is incredibly easy to misread an award letter and underestimate exactly how much money you will owe. We are here to translate complicated administrative jargon into simple, actionable steps so you can make a fully informed financial decision.

Here is how to decode your financial aid letter and find your true bottom line.

Find the Cost of Attendance

Before you look at the aid you were offered, you need to understand the total sticker price of the university. This is called the Cost of Attendance or COA.

The COA is broken down into two categories. Direct costs are the nonnegotiable bills you pay directly to the college, such as tuition, standard fees, and room and board if you live on campus. Indirect costs are estimates for other expenses you will encounter, such as textbooks, travel to and from campus, and personal supplies.

You need to look closely at the indirect costs. Some colleges underestimate travel or personal expenses to make their total COA look more affordable than a competing university.

Separate Free Money from Borrowed Money

This is where award letters get notoriously tricky. Colleges will often present a total "Award Package" number at the bottom of the page. You must read the individual line items to see what that number actually represents.

You need to immediately separate the free money from the borrowed money. Grants and scholarships are free money that you do not have to pay back. This is the only type of aid that actually lowers your real cost.

Loans, on the other hand, are borrowed money. Some colleges will list unsubsidized federal loans, subsidized federal loans, and even Parent PLUS loans right alongside your merit scholarships. While loans help you finance the bill today, you have to pay them back with interest later. Loans do not reduce your actual cost of attendance.

Understand Federal Work Study

You might also see a line item for Federal Work Study. Many families mistakenly believe this amount will be deducted directly from their tuition bill.

Work Study simply means you are eligible to get a campus job and earn up to that specific dollar amount over the course of the academic year. You will receive this money in the form of a regular paycheck to cover your personal expenses like pizza or laundry. It does not go directly to the bursar's office to pay your tuition.

Calculate Your Net Price

To figure out what you are actually paying for a year of college, you need to calculate your Net Price.

Take the direct costs from the Cost of Attendance and subtract only the free money, which includes your grants and scholarships. Do not subtract loans, and do not subtract Work Study. The resulting number is your Net Price. This is the amount your family must cover either through savings, out of pocket payments, or by taking on debt.

Finding Affordable Support

Navigating the financial realities of college is highly stressful. Traditional high-quality private college counseling is prohibitively expensive, costing families upwards of $10,000 per year.

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