How To Read Your Financial Aid Award Letter
Updated April 12, 2023
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Many students rely on institutional aid to fund their education. An annual financial aid award letter breaks down how much a college offers students. In some cases, this offer may not cover all education-related expenses. Knowing how to read your financial aid award letter helps you avoid student debt.
What is a financial award letter? The following guide explains everything students need to know about financial award letters. It offers tips for comparing aid packages and explains how students fill in a financial aid gap. Use the embedded links to access more resources. Colleges' financial aid advisors also give valuable advice to new and returning students.
When Will My Financial Aid Letter Arrive?
Colleges send letters to accepted applicants in March or April. This lets prospective students compare financial aid awards and make an informed decision. Early action or early decision applicants receive letters earlier. The specific time frame varies by school.
A financial aid award letter may come with an admissions offer or separately. Applicants who receive an admissions offer without financial aid information should contact the school.
What's Included in a Financial Aid Award Letter?
Learning how to read your financial aid award letter begins by knowing what information a typical letter contains. Although formatting varies, the details describe the cost of attendance (COA) and offered institutional aid. The letter may include federal grants, work-study programs, and private scholarships that the applicant reported to the financial aid office.
If you cannot read your financial aid award letter, see online examples for a typical letter's format and included information.
Key Terms You Should Know
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Cost of Attendance
COA describes much more than a school's advertised tuition rate. COA includes housing, meal plans, textbooks, and other typical education-related costs. It provides a rough estimate for students and their families. Actual COA may differ if learners live at home or enroll in an online program.
Colleges compare their COA against incoming students' FAFSA results. A school may offer some learners need-based aid even if they do not qualify for federal grants and loans.
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Net Cost
Learners use net cost to compare schools' affordability and determine their ability to pay for a degree. They calculate their net cost by first subtracting grants and scholarships from a school's COA. Doing so produces a school's net price. Students then determine the net cost by subtracting all other financial aid from the net price.
A low net cost may not make a school more affordable, as it accounts for unsubsidized and subsidized loans.
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Estimated Family Contribution
The FAFSA calculates learners' EFC by looking at income, assets, debt, and other financial data. The final result represents what a student or their family may contribute toward COA. EFC may change annually, as schools require students to resubmit the FAFSA to remain eligible for aid.
Learners whose COA exceeds their EFC become eligible for federal grant and loan programs. Many schools determine institutional awards by comparing learners' COA and EFC, as well.
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Financial Aid
Learners with financial need attend a school where COA exceeds their EFC. Financial need may make students eligible for federal grants, loans, and work-study programs. The law caps the amount of federal aid at the amount students need to fill the aid gap. Learners in this position may also qualify for institutional grants.
Students whose financial need changes unexpectedly may appeal their financial aid award letter by contacting their school's financial aid office.
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Financial Aid Gap
A financial aid gap occurs when a student's financial aid does not meet their school's COA. Students in this position can consider different options. Some fill the gap by paying out of pocket. Learners without financial resources turn to other forms of financial aid, such as private scholarships, grants, and loans. These and other opportunities help students pay their tuition bills on time.
Students whose financial aid award letter reveals a gap can find assistance at their school's financial aid office.
Types of Aid
Scholarships Scholarships help many students pay for their education while avoiding debt. Typical application requirements include meeting a GPA cutoff or participating in an extracurricular activity. Some organizations limit scholarship applicants to women or members of a minority group.
Merit-based scholarships do not require repayment as long as recipients stay in good academic standing. Other requirements may apply, depending on the scholarship. Learners should research scholarship terms before applying.
Grants Learners with demonstrated financial need turn to grants. Grants resemble scholarships in that recipients do not need to pay them back. The federal government and states offer grants to eligible students based on the FAFSA results. Private organizations and schools also award grants.
Grant recipients may no longer qualify for funding if their financial situation changes. Grants advertise these and other terms to prospective applicants. Review any stipulations before applying for or accepting a grant.
Work Study The federal work-study program offers part-time employment to students with financial need. Full- and part-time students may qualify. Participants work with their school's financial aid office to find a placement either on or off campus. Learners should consider their ability to balance school and work before signing up.
Students may work only as much as they need to fill their financial aid gap. Options for payment include receiving a paycheck or applying salary toward tuition directly.
Student Loans Learners who exhaust other financial aid opportunities apply for student loans. Private and federal loans require repayment. But some loans feature advantages for students. Federally subsidized loans do not start incurring interest until students graduate. This feature helps learners save money compared to their peers who take out unsubsidized loans.
Students considering loans should compare interest rates and repayment requirements. Some private loans feature significant penalties for those who miss payments.
Comparing Your Financial Aid Awards
In learning how to read your financial aid award letter, you should compare financial aid packages. Doing so takes just five steps. Learners with questions should call or email a school financial aid advisor for answers.
Tips for Comparing Financial Aid Packages
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1
Know Each School's COA
COA includes tuition, books, a meal plan, housing, and other expenses. COA may differ significantly by degree level and whether students attend a public or private school. -
2
Know Your EFC
A FAFSA award letter details EFC, a figure the government produces based on income, assets, and debt. Students' annual EFC does not change unless they appeal it. -
3
Determine How Much Aid Each School Will Provide
Schools provide different merit- and need-based institutional aid. They offer new and returning students this aid in an annual financial aid award letter. -
4
Figure Out Your Unmet Need for Each School
Many new and returning students experience a gap between COA and financial aid. Determining unmet need prompts students to apply for more scholarships or to explore more affordable schools. -
5
Make a Decision
All learners should determine how much financial aid a college provides and what type of aid is involved. Researching these two factors helps students determine whether to accept a school's offer.
Example Financial Aid Comparison
The following financial aid award letter comparison table shows a student's financial aid and out-of-pocket expenses at two schools. It shows that even though the learner receives extra aid at school B, they pay considerably more out-of-pocket. Discover different schools' expenses after aid by using a comparison worksheet.
| Things to Consider | School A | School B |
|---|---|---|
| Cost of Attendance | 40,000 | 60,000 |
| Your EFC | 8,000 | 8,000 |
| Your Financial Need | 32,000 | 52,000 |
| Financial Aid Award Package (all aid) | 15,000 | 18,000 |
| Your Unmet Need | 17,000 | 34,000 |
How Can I Fill the Gap Between Financial Aid and My Ability to Pay?
Learners can fill the gap left by insufficient financial aid in many ways. Options include appealing to their school, applying for extra scholarships, and researching less expensive colleges. Financial aid advisors help students explore their options and select the best ones.
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1
Appeal the Award Letter
Students may appeal their financial aid award letter. Appeal reasons include an unexpected loss of income, homelessness, medical expenses, or childcare costs. Learners in one of these or a similar position should contact their college's financial aid office. Advisors provide students with forms and guide them through the appeals process. -
2
Apply for More Scholarships
Thousands of organizations sponsor scholarship opportunities for college students. Internet search engines make the research and application process much easier than in the past. Current students should also contact their school's financial aid department. Advisors may recommend specific scholarship sites and awards for different majors. -
3
Consider Another College
Reviewing your FAFSA award letter and your school's financial aid award letter may reveal you cannot afford your desired school. To prepare for this, all prospective students should research alternative schools. Other colleges and universities may offer more merit- and need-based financial aid to eligible learners. -
4
Look Into a Tuition Payment Plan
Many schools offer a tuition payment plan. Participants pay part of their tuition monthly, helping them avoid student loans and other financial aid. Students set up a tuition payment plan with their school's financial aid office. Eligibility requirements may include demonstrated financial need. -
5
Get a Part-Time Job
A part-time job helps many college students fund their education. However, some students experience difficulty juggling work, school, and personal responsibilities. Try researching employers offering maximum flexibility, ideally those hiring college students. Other strategies include avoiding conflicts by planning out work and school schedules well in advance. -
5
Take Out a Student Loan
The federal government and private lenders offer student loans. The government reserves most of its loans for students with demonstrated financial need. Many private lenders provide loans to learners no matter their need. Consider loans as a last resort, as interest payments increase out-of-pocket expenses over time.
What Does it Mean to Accept a Financial Aid Award?
The final step in reviewing a financial aid award letter involves accepting aid. A school may provide one or many options based on students' financial needs. Learners offered multiple aid sources do not need to accept them all, depending on personal preference. Some students may need the aid a work-study program provides but lack the time for work and school. Other students may turn down loans to avoid student debt.
Learners must prioritize their options to choose the right aid. Institutional scholarships and grants come first, as they do not require repayment. Federal grants provide the same benefit. Following that, consider a part-time work-study program to pay for a degree. Due to potential negative consequences, including the inability to save for future financial goals, view loans as a last resort.
Learners indicate which aid they accept by checking boxes and signing the financial aid award letter. They turn in the letter to their financial aid office. Students with questions or concerns should contact the aid office before marking the letter in any way. An advisor guides students through different options, such as applying for outside scholarships to avoid student debt.
Thomas Broderick
Thomas Broderick is a freelance writer and the owner of Broderick Writer LLC. He creates study guides, informational websites, and blog posts for clients in the education field. Thomas is also a published author of over 20 short stories and a member of the Science Fiction & Fantasy Writers of America.
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