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Understanding & Comparing Financial Aid Award Letters
Learn how to analyze financial aid award letters like a pro and learn to pick the best option for your situation.
What is a Financial Aid Package?
Your college acceptance offer will include a financial aid package detailing your net cost. Though what’s included in a financial aid package varies from school to school, it will generally includes the following:
- Grants and scholarships, which don’t have to be paid back.
- Federal student loans, which do have to be paid back with interest.
- Work-study, which must be earned.
For more details on these forms of financial aid, visit our Ways to Pay For Higher Education page.
What is a Financial Aid Award Letter?
A financial aid award letter is a document that outlines the cost of attendance at a college or university, including expenses such as tuition, fees, room and board, and supplies. It provides a detailed list of the financial aid sources available to the student, which may include federal loans, grants, scholarships, and work-study opportunities. In some states, like New York, schools are required to provide a uniform financial aid award letter to make comparing college costs easier.
The award letter often mentions the Student Aid Index (SAI), previously known as the Expected Family Contribution (EFC). The SAI is a numerical value used to determine a student’s eligibility for need-based financial aid. It replaces the Expected Family Contribution (EFC) and is designed to measure a family’s financial strength.
The SAI range is typically from -$1,500 to a positive value that can theoretically go as high as 999,999, though most students’ SAIs will fall within a more typical range.
- Negative SAI (-1,500 to 0): Indicates significant financial need, allowing for additional aid consideration.
- Positive SAI (1 to 999999): Reflects decreasing levels of financial need, with higher values indicating less need for financial assistance.
Award letters typically cover one academic year, with new letters issued each year upon reapplication for financial aid. You want to pay attention to any conditions associated with your aid, such as maintaining a certain GPA or enrolling in a specific number of credit hours. Note when and how your financial aid will be disbursed to you. Some aid may be split between semesters.
How to Calculate and Evaluate Your Expected College Charges
Understanding your financial aid award letter is crucial for planning your college expenses. Follow the steps below to calculate your expected charges and evaluate your financial aid.
Tip: Most colleges will offer a net price calculator on their website. Use it to compare college costs.
Step 1: Calculate Expected Charges–The Total Cost of Attendance
Start by calculating the total charges billed by the college. This includes tuition, fees, housing, and meals (if applicable).
Example Total Cost Calculation
| Billed by College | Scranton | Binghamton | Hofstra |
|---|---|---|---|
| Tuition | $51,410 | $7,070 | $55,450 |
| Room and Board | $17,000 | $17,984 | $18,939 |
| Personal Expenses | $100 | $2,000 | $2,000 |
| Other | $875 | $3,695 | $1,120 |
| Cost of Attendance | $69,385 | $30,749 | $77,509 |
Step 2: Deduct Expected Grants and Scholarships from the COA
Subtract the total grants and scholarships from your total annual Cost of Attendance to find your balance after grants. This is your “net cost”.
Example Total Funding Gap Calculation
| Scranton | Binghamton | Hofstra | |
|---|---|---|---|
| Cost of Attendance (total charges) | $69,385 | $30,749 | $77,509 |
| – Scholarships | $32,000 | $15,000 | $34,000 |
| – Grants | – | $500 | $500 |
| – Work Study | – | – | – |
| Total Funding Gap (COA-Awards) | $37,385 | $15,249 | $43,009 |
Step 3: Determine How to Cover the Funding Gap
Next, subtract any additional family contributions and federal loans.
Example Total Debt Calculation
| Scranton | Binghamton | Hofstra | |
|---|---|---|---|
| Total Funding Gap | $37,385 | $15,249 | $43,009 |
| – 529/Savings/Parent Contribution | $10,000 | $10,000 | $10,000 |
| – Federal Direct Subsidized Loans (taken out by student) | $511 | $511 | $511 |
| – Federal Direct Unsubsidized Loans (taken out by student) | $4,989 | $4,738 | $4,989 |
| – Federal Direct Parent Plus Loans (for undergraduate studies only) | $21,885 | $0 | $27,509 |
| Total Loan Amount Borrowed By Student Per Year | $5,500 | $5,500 | $5,500 |
| Total Loan Amount Borrowed By Parent Per Year | $21,885 | $0 | $27,509 |
| Grand Total Indebtedness Per Year | $27,385 | $5,500 | $33,009 |
| Estimated Total Indebtedness For Four Years | $109,540 | $22,000 | $132,036 |
You Might Be Able to Negotiate a Financial Aid Package
If your school’s net cost greatly exceeds your financial aid, appeal for additional aid by contacting the financial aid office promptly.
Schools have limited federal aid funds, so early appeals are recommended.
Students can also reach out to the admissions office for potential increases in scholarships or merit-based funding. Support your appeal with specific examples and documentation of your family’s financial or unique situation and allow a few weeks for the process.
What to Know Before Accepting a Financial Aid Package
Things to Remember
- Aid doesn’t always mean free money. It often includes loans that need to be repaid. Remember, you don’t have to accept all the aid offered in your financial aid award letter.
- If the loan amount exceeds your comfort level or needs, consider rejecting part or all of it. However, make sure to find alternative ways to cover any unmet educational costs.
- Prioritize non-repayable funding like scholarships, grants, and work-study opportunities.
- Before accepting any aid, understand the terms. While grants and scholarships may seem like free money, they often come with conditions, such as maintaining a certain academic performance or enrollment status. Be aware of these eligibility requirements.
- When considering loans, thoroughly understand the terms before signing, including interest rates (both fixed and variable), deferment options, and the repayment period.
- Parents should also know that they can borrow up to the Cost of Attendance through federal Direct Parent PLUS loans for a dependent student’s undergraduate studies, potentially avoiding the need to borrow or co-sign on private loans.
- Use the studentaid.gov loan simulator to understand the true total cost of borrowing for the life of a federal loan.
What’s next?
- Accept or Decline Aid: Follow the instructions on your award letter to accept or decline each part of your aid package.
- Create a Budget: Use the information in your award letter to create a budget for the academic year, considering all sources of income and expenses.
- Explore Additional Funding Options: Look for additional scholarships, consider part-time employment, or seek advice from your financial aid office for other options.
If you’ve gone through all of these steps and are still confused, contact us! Our counselors can help guide you through this process and choose the option that’s right for you.
Useful Links
Glossary
- Net Cost: The amount a student or family will need to pay out of pocket after subtracting grants, scholarships, and other non-repayable aid from the total cost of attendance.
- Work-Study: A federal program that provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses.
- Student Aid Index (SAI): The number used by schools to determine how much financial aid a student is eligible to receive, replacing the Expected Family Contribution (EFC). It indicates a family’s financial strength.
- Expected Family Contribution (EFC): The previous term for SAI, which represented the amount of money a family was expected to contribute toward a student’s education.
- Cost of Attendance (COA): The total amount it will cost to go to school, usually stated as a yearly figure. COA includes tuition, fees, room and board, books, supplies, and other expenses.
- Direct Costs: The expenses billed directly by the college, such as tuition, fees, and on-campus room and board.
- Federal Direct Subsidized Loans: Loans for students with financial need, where the federal government pays the interest while the student is in school.
- Federal Direct Unsubsidized Loans: Loans available to students regardless of financial need, where the student is responsible for paying the interest during all periods.
- Federal Direct Parent PLUS Loans: Loans that parents of dependent undergraduate students can use to help pay for college, which must be repaid with interest.
