Breaking Down a School’s Financial Offer

A large financial aid offer is not automatically the best offer. To compare colleges accurately, separate grants and scholarships from loans and work-study, calculate what each school will actually cost you, and check whether the aid will continue in future years.

What Is a Financial Aid Offer?

After you are admitted, a college may send you a financial aid offer, sometimes called a financial aid award letter. It explains the types and amounts of financial aid the school is offering you.

Depending on your eligibility and the college, an offer may include:

Grants

Aid that generally does not have to be repaid, although some grants have requirements that must continue to be met.

Scholarships

Aid awarded for reasons such as academic achievement, financial need, talent, athletics, or other qualifications.

Work-Study

An opportunity for eligible students to earn money through employment. The listed amount is not the same as receiving a grant upfront.

Student Loans

Borrowed money that must be repaid, generally with interest. A loan offer should not be treated as a discount on the price of college.

Your FAFSA Submission Summary is not your financial aid offer. Your college determines the actual aid it is offering and sends that information separately.

Start With the Cost of Attendance

Before looking at the aid, determine how much the school estimates it will cost to attend. This is commonly called the cost of attendance (COA).

Cost of attendance may include:

Tuition and required fees
Housing and food
Books and course materials
Transportation
Personal expenses
Other education-related costs included by the college

Some of these costs are paid directly to the college, while others are estimates of expenses you may have during the year.

Cost of attendance is not necessarily the amount that will appear on your college bill. It is an estimate of the broader cost of attending for the academic year.

Separate Free Aid From Borrowed or Earned Money

One of the easiest ways to misread a financial aid offer is to add every item together and call the result a discount.

Instead, separate the offer into three categories.

1. Grants and Scholarships

These generally reduce the price you need to pay without creating debt. They are the most important forms of aid to identify when comparing net price.

2. Work-Study

Work-study gives eligible students an opportunity to earn money through employment. You generally must find a qualifying job and work to earn the amount shown in the offer.

3. Loans

Loans can help you cover college expenses, but they are debt. Compare the borrower, loan type, amount, interest rate, fees, and repayment terms before deciding how much to accept.

Calculate the Net Price

The most useful starting point for comparing schools is often the net price.

Cost of Attendance − Grants and Scholarships = Net Price

Do not subtract student loans simply because they appear in the financial aid package. Borrowing can help you pay the net price, but it does not make the college less expensive.

Example

Cost of attendance: $48,000

Grants and scholarships: $20,000

Net price: $28,000

If the school also offers $5,500 in student loans and $2,000 in work-study, those amounts may help you cover the $28,000 net price, but they should not be counted as additional discounts.

Don’t Confuse the Student Aid Index With Your Bill

Your FAFSA information is used to calculate a Student Aid Index (SAI). Colleges use the SAI when determining eligibility for certain types of financial aid.

The SAI is an index number. It is not a bill, and it is not the amount that your family is necessarily expected to pay the college.

This distinction is important because older financial-aid information may still refer to the former Expected Family Contribution (EFC). The EFC has been replaced by the SAI.

Look Closely at Scholarships and Grants

Grants and scholarships are valuable because they generally do not need to be repaid, but you should still read the conditions attached to them.

Questions to Ask

Is the award renewable every year?
Is there a minimum GPA requirement?
Must you maintain full-time enrollment?
Does the award require a particular major, activity, or program?
Can the amount change in later years?
Is the scholarship available for four years or only the first year?
What happens if you temporarily fail to meet the renewal requirements?

A generous first-year scholarship is less valuable if it disappears in later years. When possible, estimate the cost of the entire degree rather than comparing only freshman-year offers.

Understand the Loans in the Offer

A financial aid offer may include federal student loans. You are not required to borrow the full amount simply because it is offered.

Before accepting a loan, identify:

Who will legally owe the debt
Whether the loan is federal or private
Whether it is subsidized or unsubsidized
The interest rate
Any loan fees
When interest begins accumulating
When repayment begins
How much you expect to borrow over the entire degree

Direct Subsidized Loans generally have more favorable interest treatment while an eligible student is enrolled than Direct Unsubsidized Loans. If you need to borrow, understand the differences before accepting the loans.

Understand Work-Study

Federal Work-Study can appear alongside grants, scholarships, and loans on a financial aid offer, but it works differently.

A work-study award indicates how much you may be eligible to earn through qualifying employment. You generally need to obtain a work-study job and work the required hours to receive those earnings.

Do not assume a $3,000 work-study award means your first college bill will automatically be reduced by $3,000.

Compare the Amount You Still Need to Cover

After subtracting grants and scholarships, determine how you would cover the remaining cost.

Possible sources may include:

Student or family savings
Current income
Work-study or another job
Federal student loans
Parent borrowing
Private student loans
Outside scholarships
A college payment plan

This step can reveal a major difference between two offers that initially look similar.

Compare Offers Using the Same Method

Financial aid offers do not all use the same layout or terminology. Create your own comparison using the same categories for every school.

For Each College, Write Down:

Total estimated cost of attendance
Total grants and scholarships
Net price
Work-study offered
Student loans offered
Other borrowing that may be necessary
Estimated amount you or your family must cover
Conditions required to renew grants and scholarships

A college offering $30,000 in total financial aid is not necessarily less expensive than a college offering $20,000. The first school could have a much higher cost of attendance or could include substantially more loans in its offer.

What If Your Financial Situation Has Changed?

The financial information reported on the FAFSA may not always reflect your family’s current situation. Significant changes can include a loss of employment, reduction in income, or certain major expenses.

If your financial circumstances have changed substantially, contact the college’s financial aid office and ask whether you can request an aid adjustment, sometimes called a special-circumstances review or professional judgment.

The school may ask you to provide documentation and will determine whether an adjustment is appropriate.

Questions to Ask the Financial Aid Office

Which parts of this offer are grants or scholarships?
Which parts are loans?
Is work-study guaranteed, or do I need to find an available job?
Which scholarships and grants are renewable?
What requirements must I meet to renew them?
Are tuition, housing, or other major costs likely to change next year?
Are there additional fees not obvious in this offer?
What amount will actually be due directly to the college?
What happens to my aid if I change my enrollment level or housing?
Can my offer be reviewed if my family’s financial circumstances have changed?

Financial Aid Offer Checklist

Find the school’s total cost of attendance.
Separate grants and scholarships from loans and work-study.
Calculate the net price.
Determine how much borrowing would be required.
Check scholarship and grant renewal requirements.
Estimate costs for more than just the first year.
Compare financial aid offers using the same categories.
Ask the financial aid office about anything you do not understand.
Request a review if your financial circumstances have changed substantially.
Consider cost alongside academics, graduation outcomes, and overall college fit.