Financial aid award letters: What to know and how to compare

How to Compare Financial Aid Award Letters

Financial aid award letters: What to know and how to compare

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You did your homework, researching dozens of colleges and sending out applications to a handful that you decided were right for you. If all went well, you’ve got acceptance letters from more than one school.

Now you’re ready to compare the financial aid award letter that you should have received from each school that accepted you. Here’s how to zero in on the most important numbers, and compare financial aid offers you’ve received from each school before making your final decision.

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What is a financial aid award letter?

A financial aid award letter lists all of the aid that a college is prepared to offer you. Depending on the information that you submitted on your Free Application for Federal Student Aid (FAFSA), you may be offered scholarships and grants, work-study, and student loans.

An offer of financial aid typically shows you exactly how much money you’ll need to come up with to pay for your first year of school after subtracting “gift aid” that doesn’t have to be repaid, grants and scholarships. That number is called the net price. The best way to make a fair comparison between the financial aid offers you receive is by comparing the net price.

If you want to see an example of the information that the U.S. Department of Education recommends colleges provide in their award letters, see this model “shopping sheet,” that’s being adopted by some forward-thinking schools.

How to compare financial aid award letters

Comparing the financial aid offers you receive from each school is straightforward — if your award letter provides a net price. But schools often fail to include the net price in their financial aid award letters, so in some cases you’ll have to calculate it yourself.

Fortunately, the formula is pretty simple:
Net price = Total cost of attendance – Gift aid

For example, say your total cost of attendance is $22,000 a year and you’re offered $4,000 in gift aid. Your net price is $18,000.

Just make sure that your total cost of attendance calculation includes tuition and fees, room and board, books and supplies, transportation, and personal expenses. Some schools only list tuition and other costs that you pay directly to them in their offer letters. Also, don’t include aid loans and work-study when tallying up “gift aid,” because you have to pay it back or earn it.

The lower the net price, the less you’ll pay for your degree. Until you compare net prices, you might not realize that a school you thought was reach is actually a better deal than a college you expected to be cheaper.

If any of the information that you need to calculate the net price is missing from your financial aid offer, contact the school’s financial aid office.

Can I negotiate a better offer of financial aid?

If your heart was set on going to a school that made you a disappointing financial aid offer, you can try to negotiate a sweeter deal — particularly if you got better offers from other schools.

Also, if you or your family are experiencing a new hardship unexpected medical bills or unemployment, you might be able to negotiate a better financial aid package.

There are two types of appeals you can make if you need to negotiate:

  1. Need-based appeal: This appeal usually involves going to the school’s financial aid office. If you or a family member have lost a job, been demoted, or fallen ill, providing documentation can bolster your case. Many schools will have a form for you to fill out, and you can also provide a cover letter with your documentation.
  2. Merit-based appeal: This is typically made to a school’s office of enrollment or admissions. You’ll want to provide any award letters you’ve received from other schools and ask your school of choice if they can match them.

More ways to pay for college

If your net price still seems high and you’ve exhausted all the scholarships and grants available to you, remember that most students borrow for college.

If you must borrow for college, start with federal student loans and try to keep the total amount borrowed in line with what you expect your annual salary to be after graduation.

If you max out on your borrowing limits for the most affordable federal loans, compare private student loan rates offered by lenders before turning to costlier federal PLUS loans.

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Top Six Items to Consider when Comparing Award Letters

Financial aid award letters: What to know and how to compare

This year’s college-bound seniors and their families are in uncharted waters.  The good news is the colleges are in the same position.

  You can anticipate more stories than ever about how to navigate this year’s financial award appeal process.  Due to COVID, one thing for sure, the college financial aid offices will be overwhelmed will appeals.

  Here are six steps to consider when comparing award letters.  By being prepared you will have a better chance of success.

The lack of financial awareness and additional analysis of the financial award letter is a shortfall of the college process, especially when comparing financial aspects of the decision.  If it was that easy we would not have $1.71 in student loan debt that is affecting almost 45 million people.

College award letters only provide a financial snapshot of one year of college and they are not always in a standardized format. This makes it difficult to compare them easily and project the total net cost and debt of each college.

The proper college financial award comparison needs to include a four-year “WHAT” you will pay and the “HOW” a family will pay for this education.  By using this approach, the transparency of the financial outcome will reduce excessive student debt.

PayForED’s comprehensive approach helps families analyze each award letter side by side easily.  It will simplify a very confusing and complex problem by standardizing the information. Our goal is to help families review and clarify the “bottom line” or “net cost” of each college listed on their award letter.

Here are the steps you need to use to make the best college decision and be prepared to negotiate with the college.

Customize Your Cost of Attendance

Every college-bound student should customize their cost of attendance or COA.   The COA includes tuition, room, board fees, books, transportation, and personal expenses.  We recommend that families build their own cost of attendance during this analysis stage.

Families will need to develop both the direct and indirect costs of a college.  Direct costs will include tuition, fees, room, and board.  The indirect costs include books, travel expenses, and personal living expenses.

  When creating the direct cost families, you need to review the academic major, fees, room type, and meal plan for each school on their list.  Prices can vary greatly depending on the program, room type, and meal plan selected.

   A family may find that some colleges mandate that first-year students take the maximum meal plan the first year, but this can be reduced as the student progresses through school.

Understand Each Scholarship List

An important part of the award letter analysis requires the family to separate the merit scholarships from the need-based scholarships.  This will better enable the family to identify the net cost over multiple years and help project future net costs.  The merit scholarships are the free money given to the student and are a direct reduction of the cost billed by the college.

A merit scholarship is a financial award given to a student their specific academic achievement or talent.  Most merit scholarships have additional requirements that need to be maintained to receive them in future years.

  This could include a certain GPA or activity, such a community service.

  Discussing the scholarship requirements with your child can help reinforce the importance of maintaining their GPA to retain the merit scholarship financial benefit.

A need-based scholarship or grant is an amount that is determined by the student’s Expected Family Contribution (EFC) calculation and financial need. If the COA is higher than the student’s EFC then the student may qualify for a need-based scholarship or grant.  Most colleges do not meet 100 percent of the need.

It is also very important for the family to review their own family timeline and see how this impacts your EFC calculations over the next four years.  The EFC calculation may change when a family has more or fewer children in college at the same time.  These changes can have a dramatic impact on your financial award due to the changes in your financial need.

For this year a review of the EFC will be critical since many families were impacted by COVID.  This year’s EFC uses financial income from the tax year 2019.  If there has been a significant change from that income then a financial appeal should be done. Here is a link to a more detailed discussion of college financial award appeals.

We recommend that if you are unsure of the type of scholarship on the award letter you need to contact the college for clarity.

Self Help Money: Loans and Work-Study

Loans and work-study are considered self-help money on the award letter and are dependent on a student’s financial need each year.  The self-help details are directly related to a student’s EFC.  Each year, a FAFSA needs to be completed.  This will allow the student to qualify for federal loans.  The type of federal loans will again depend on the student’s financial need that year.

Identifying the type of student loan that you have been awarded can be confusing.  When looking at your award letters, you may see only a federal unsubsidized loan for one school while another school lists both federal subsidized and unsubsidized loans. This is determined by your financial need at each college.

The student’s financial aid need will vary between schools.  The variance in college cost and the student EFC will determine the mix of student loans in the financial award.  Most first-year freshmen will normally see a combination totaling $5,500.

Some colleges will list a Parent PLUS loan in the financial award.  This loan is legally the parent’s responsibility.  It can often distort the true net cost of a college.  When comparing colleges, we recommend this amount be removed at the comparison stage as it may distort the analysis.

Work-study programs offer the undergraduate a part-time job each semester while they are in college. Un the scholarships and loans, this money will not offset the direct college expense.  The award is dependent on the student filing the FAFSA form and is awarded need.  It is used to offset other costs such as living expenses and books.

Projection of the Four-Year Net Cost of College – “Your WHAT”

The award letter provides only a one-year look at the cost of college.  This is a shortfall in the process.  It does not provide a projection of the four-year cost and debt.

  To make the best college financial decision, a family will need to understand and project the four-year net cost of each college.  Creating this analysis can be overwhelming and difficult.

 Taking the initial award letter and multiplying it by four is not a good approach.

The PayForED software can provide this missing detailed comparison of award letters.  It helps students and parents make the informed decision.  Families need to know how their financial position can change depending on the family timeline of other siblings in college.

  These changes will have a direct impact on future financial aid depending on the current award structure.  By creating a four-year analysis, a family can better identify the true value of a college and make a better decision on what the family will pay to graduation.

Projecting Student Debt – “Your Customized HOW”

After developing a four-year net cost of college, families need to determine how they will pay for these expenses.  It leads us to the next important step which is the “HOW.

”  A family’s “HOW” may include a college savings plan (i.e. 529), monthly cash flow, tax strategies, and student loans.

  After understanding these numbers, students will have a  general idea of how much debt they will acquire during their education.

Often overlooked is the importance of the student loan structure.  A student’s debt structure will determine the student’s repayment options in the future. By better understanding how to use your financial resources and structure the student loans, families will plan better for the future and have an easier repayment process after graduation.

Colleges promote how much financial aid they provide, creating a level of hope and an emotional tie for students.  Cost and debt are rarely discussed during the application process.  If you have a better estimation of “WHAT” you will pay, then you can make informed decisions on “HOW” you can pay this expense.

Most parents do not understand the legal consequences of federal student loan options.  Each student is limited to a certain yearly amount as well as a lifetime limit.  These federal student loans are the student’s full legal responsibility.

 If additional resources are needed, a family may need to obtain a Parent PLUS Loan or co-sign for a private student loan.  In both cases, these loans are directly the legal responsibility of the parent.

  These loan decisions could impact the parent’s credit score and possibly their financial future.

Other Factors

Other items that students may fail to consider during their decision process are the retention and graduation rates for each college.  Reviewing the retention gives insights into the transfer rate for the college.  If a student transfers to another college, most students will lose credits hence more student debt or tuition at the very least.

  Lower graduation rates at a college may indicate that students are not graduating in four years.  It is important to discuss the cost associated with not attaining the desired degree in four years and the cost of another year of school.  When looking at the retention and graduation rates, make sure that the data is current.

  Always check the year of the statistics given by any institution.

The family needs to evaluate each college and see if their child’s personality will thrive in the environment at that institution.  Be comfortable with the decision.  A state school may be more cost-effective, yet you need to determine if your child will thrive in a larger learning environment.  The best way to save money is to graduate on time.

Comparing Financial Award Letter Approach Summary

During this period, the emotion and stress of the college decision are high.  At PayForED we make it our job to equip the student and parents for success.

  By providing an easy-to-use college financial award comparison tool, student loans can be minimized and excessive student debt can be avoided.

  As part of the award letter comparison, we often recommend that students talk to peers that are in college or have recently graduated from that college.  It may help in the decision process.

If you plan to use a private loan to help supplement the cost of paying for college then PayForED can also help with our Private Loan Market Place.

PayForED’s Preferred Private Student Loan Lenders

Variable Rates: 1.04%- 11.98% (APR)*

Fixed Rates: 3.34% – 12.99% (APR)*

*Rates includes .25% Auto Pay Discount

Variable Rates*: 1.13% – 11.23%

*Rates includes .25% Auto Pay Discount

Variable with ACH: 2.14%- 12.94%

Fixed with ACH: 3.34% – 14.50%

Variable Rates: 6.61%- 9.42% (APR)*

Fixed Rates: 6.98% – 10.74% (APR)*

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4 Steps to Understanding and Comparing Financial Aid Offers

Financial aid award letters: What to know and how to compare

When I was in my last semester of high school, I checked my family’s mailbox just as much as I checked Snapchat and Instagram combined. It was the season of admissions decisions, and I was getting letters from all the colleges I’d applied to.

But once I’d gotten into several schools, my attention shifted to my e-mail inbox. I was waiting on information that was just as critical: my financial aid offer from each college.

I knew that for me, the amount of financial aid I got from a school mattered just as much as the general admissions decision. I’d fallen in love with each of the schools I’d visited, and I knew I’d be happy anywhere.

Basically, my choice was going to come down to the money.

Analyzing different aid packages can seem way too much math for the end of your senior year—at least it did to me—but it’s important stuff. Check out my four steps to make this analysis simpler.

1. Make sure you know what you’re looking at.

The financial aid offer (sometimes called an award letter) typically comes in an e-mail from the college’s financial aid office. The offer includes the types and amounts of financial aid you’re eligible to receive from federal, state, private, and school sources.

Be sure you understand what each type of aid is and whether it needs to be paid back. For example, when I got into UNC-Chapel Hill, my aid offer was a mix of scholarships, which I didn’t need to pay back, and private loans, which I did.

My offer from Duke (booooo) had mainly the same stuff with some grant money mixed in.

Click to download PDF.

Lucky for you, hundreds of colleges nationwide have signed on to present financial aid offers in a standardized format known as the Shopping Sheet.

The Shopping Sheet is a standardized award letter template that makes it easy to compare financial aid offers from different schools.

In addition to providing personalized information on financial aid and net costs, the Shopping Sheet also provides general information on the college, graduation rate and loan default rate.

2. Find your out-of-pocket cost to attend.

Click to enlarge.

Now you’re going to want to see what you’ll be paying pocket if you decide to go to this school. Basically, your out-of-pocket cost (also known as net cost) is what it’ll cost you to attend minus the financial aid you receive that you don’t have to pay back, grants and scholarships.

To find this amount, start with each school’s cost of attendance. Cost of attendance is a jumble of different expenses, from tuition to books to transportation.

It even factors in a food allowance, but this is standardized across students, so it won’t take into account quirks your $170-a-year Pop-Tart habit. From there, you want to subtract the free money ( grants and scholarships you were awarded) to come up with your out-of-pocket cost.

This is the number you’ll want to compare across schools. Good news: If your college presents its aid offer as a Shopping Sheet, this will be calculated for you!

Your financial aid offer will probably include other types of aid too, work-study and student loans. Remember that work-study is money that you earn through working, and it’s not applied directly to tuition.

Also keep in mind that any loans are just borrowed money; you’ll have to pay them back with interest.

 Finally, you don’t have to accept the loans you’re offered—and if you do accept a loan, it’s okay to accept less than the full amount offered.

3. Compare your aid offer with other schools’ offers.

Here’s the crux of the decision, where you pit aid offers against one another to see which school will be the most affordable.

Your aid offer is unique to you and each school you apply to, so your aid amounts will vary from school to school. Obviously, cost of attendance will vary, too.

This means that you’ll definitely find some discrepancies in what you’d pay pocket at the schools that admit you.

Another tool comes in handy here: The Consumer Financial Protection Bureau has a great interface for comparing aid offers and attendance costs, with general college information lumped in. In short, it’s an interactive side-by-side of college Shopping Sheets.

Click to use the CFPB’s comparison tool.

For me, I ended up choosing the school with the lowest out-of-pocket cost of attendance. Shopping Sheets weren’t around when I was deciding on a college, so I had to do net calculations myself for each school once all the aid offers had come in.

Looking for more in-depth tips? Head over to the U.S. Department of Education’s page on comparing aid offers and figuring out net price.

4. Compare the schools themselves.

Finally, it’s time to analyze the colleges a little more deeply to make sure you’re getting the most bang for your buck. Measures graduation rate and income after graduation are great indicators of a college’s value.

These benchmarks can help you come to a decision on where to enroll, especially if you’re down to just a few colleges with pretty similar net costs of attendance.

Even if one college’s cost is a little higher, it might be worth paying a little more pocket if it means massively larger benefits later down the road.

Click to use the College Scorecard.

When I was making this decision, I had about 27 different sites bookmarked on Internet Explorer (yes, Internet Explorer) as I tried to cobble together information from all over about the different schools I’d applied to. Nowadays, all this information is consolidated in the College Scorecard search tool.

The College Scorecard’s information is valuable no matter where you stand with your aid offers. College is a big investment, so you want to make sure that the school you pick is a good fit for you no matter what. But the resource comes in extra clutch when comparing aid offers doesn’t give you a clear winner.

All right, here are our takeaways: Keep an eye on your inboxes. Be on the lookout for different types of aid in your package. Figure out what you’re paying pocket (that includes loans!). Compare your offers. Compare your schools. And most of all, eat lots of Pop-Tarts.

Drew Goins is a senior journalism major at the University of North Carolina. He’s also an intern with the U.S. Department of Education’s Federal Student Aid office. s: politics, language, good puns. Diss: mainly kale.

Photo by Getty Images.


How To Evaluate Your Financial Aid Offer

Financial aid award letters: What to know and how to compare

The fat college envelopes have arrived! You've been admitted to several of your target schools—congrats! If you've submitted the  FAFSA it won't be too long before you receive additional mail—your financial aid award letters.

Offer letters may seem confusing at first, but we can help walk you through your award. Here’s how to compare offers to determine which one makes the most financial sense for you.

How to Compare Financial Aid Packages

Your financial aid packages are designed to bridge the gap between what college costs and what you and your family can afford to contribute. When you review and compare award packages, there are two criteria to take into account:

  1. how much of your need is being met
  2. how your need is being met

(For a more detailed explanation, read How Does Financial Aid Work? ) 

Financial Aid Award Examples

Sometimes the total size of your financial aid package is not a good measure of its value. Sound contradictory? Check out these award scenarios.

Let's say that two colleges offer you admission: Jefferson College and Roosevelt University. Their sticker prices (cost of attendance) are respectively $20,000 and $40,000. Let's say that your estimated family contribution (EFC), a number which is determined by your FAFSA, is $9,000. Here's the breakdown:

Jefferson CollegeRoosevelt UniversityCost of AttendanceYour EFCYour Need

Remember: Your EFC always remains the same. Your need, on the other hand, varies dramatically, depending on cost of attendance. Let's see how this plays out when your financial aid award letters arrive.

Scenario #1

Roosevelt University offers a hefty award package—more than double the amount offered by Jefferson College.

Jefferson CollegeRoosevelt UniversityYour Financial AwardYour NeedYour Unmet Need

But there's a problem. Roosevelt has not met all of your financial need. If you decide to enroll at Roosevelt, you will need to pay $9,000 to cover your EFC, plus another $6,000 in unmet need. Jefferson, on the other hand, has met your entire need. In this instance, the bigger award is not the better award.

Scenario #2

Jefferson offers a financial aid package totaling $8,000 and Roosevelt offers one totaling $31,000.

Jefferson CollegeRoosevelt UniversityYour Financial AwardYour NeedYour Unmet Need

Now as you probably recall, the cost of attendance is much higher at Roosevelt than it is at Jefferson. But when you factor in their total award package, the more expensive school becomes the more affordable school! (If you’re worried about the sticker price of college, read about the cost of college .)

But when you dig deeper into the financial aid package details, this scenario should give you pause. Take a look at how each financial aid package is made up:

JeffersonRooseveltGrantsScholarshipWork StudyLoansTotal Financial Aid Award
$8,000 $31,000

When comparing the two financial aid offers side-by-side, you can see that:

  • Jefferson didn't meet your entire need. After $9,000 EFC, you will need to come up with an additional $3,000, probably from a private education loan .
  • Roosevelt has met your entire need, but the award is very loan-heavy.

So which award package is the better one? In this case, that's entirely you and your family's decision.

Making a Financial Aid Decision

Let's reiterate. When you review and compare award packages, the two criteria to take account of are:

  1. How much of your need is being met.
  2. How your need is being met.

These are the financial considerations:

  1. If your dream school's award offer is loan-heavy, should you go to your second choice?
  2. If your dream school doesn't cover your entire need, should you borrow even more with a private loan?

When it comes to paying for college, only you and your family can answer these questions.

Our Advice

Before you accept an award offer and enroll in college, be sure you know what you are committing to and the consequences of your decision.

Looking for strategic college advice?

Get one-on-one help from former Ivy League and top tier admission officers. Our College Admission Counselors will help you find, apply, and get accepted to your dream school.

Learn More

Rob Franek, Editor-in-Chief at The Princeton Review, is the company's primary authority on higher education. Over his 26-year career, he has served as a college admissions administrator, test prep teacher, author, publisher, and lecturer. Read more and follow Rob on : @RobFranek.


How to Read a Financial Aid Award Letter

Financial aid award letters: What to know and how to compare

COVID-19 relief may affect information on this page. Know your options before making any decision.

Financial aid award letters will arrive soon after you receive your college acceptances. You need to decide which school gives you the best award package, but comparing offers can be a challenge. Every letter includes different language, formatting and content.

» MORE: Your guide to financial aid

A 2018 analysis of over 500 financial aid award letters by New America, a nonpartisan think tank, found numerous inconsistencies in jargon among the letters. And, more than one-third didn’t include any cost information alongside financial aid amounts.

To understand what each financial aid award letter says, you’ll need to cut through the clutter so you can make the best financial decision.

What your award letter should include

No two financial aid award letters will look a, but they should have:

A list of the financial aid types and amounts awarded

Your awarded aid could include federal, state and institutional grants, as well as federal work-study and scholarships. The list will also include the amount of subsidized and unsubsidized federal loans you can borrow and, often, a PLUS loan your parent or guardian can borrow for your education.

Your cost of attendance

The cost of attendance includes tuition, fees, and room and board for your first year. But it’s not complete. It doesn’t factor in everything you’ll pay for, or how many years you’ll attend.

» MORE: What if I didn't get enough financial aid?

Now that you know what to look for, here’s how you can use this information.

Determine the true cost of college

Only 40% of the sample letters analyzed by New America included a calculation of what students would need to pay. To figure out the cost of college yourself, here’s what to do:

Find the net price

The net price is calculated as the cost of attendance, including additional expenses, minus grants and scholarships. You can use a net price calculator, available on every college’s website. The net price includes estimated additional costs books and supplies, personal expenses and transportation.

“The net price is calculated as the cost of attendance, including additional expenses, minus grants and scholarships. ”

Think beyond year one

Net price factors in the cost of only one year in school. It also doesn’t take into consideration tuition increases, which are ly, data from the National Center for Education Statistics. Multiply the net price by four to get the total minimum cost you can expect. As tuition increases each year, your costs will go up, but your financial aid might not.

» MORE: Is college worth it? Here's how to do the math

Understand aid types

In a financial aid award letter, the way aid award money is labeled doesn’t clarify much.

For example, work-study and loans may be referred to as “self-help aid,” while scholarships and grants may be listed as “gift aid.

” In the New America study, among 455 colleges that offer unsubsidized loans, there were 136 unique terms for that loan, and 24 of those terms didn’t even include the word “loan.”

Here’s how to tell the difference among aid types in your award letter:

  • Grants and scholarships: Awards that do not have to be repaid. These can come from the federal government, your school or your state’s grant agency. They may be need- or merit-based.

  • Work-study: Money you can earn, typically at an hourly rate, that’s funded by the government. It isn’t guaranteed: You have to find a qualifying work-study job that fits with your academic schedule, and the amount on your award letter is the maximum you can earn.

  • Loans: Borrowed money you must pay back with interest. You borrow federal direct loans from the government. These loans often have lower interest rates and more borrower protections than private student loans. And, no credit check or co-signer is required.

» MORE: How much can you get in student loans?

How to compare financial aid awards

Once you grasp the cost and your financial aid options, you can more easily compare offers side by side to see which school will be the most affordable. This table shows you how you can compare costs and financial aid awards from two schools.

Financial aid comparison worksheet

Step 1: Calculate total cost of attendance (COA) Add tuition and fees + room and board + estimated books and supplies + estimated transportation costs + estimated personal expenses

Step 2: Subtract total money that’s free from COA. Add federal Pell Grant + state and institutional grants + scholarships + and military education benefits

Step 3: Subtract total money you work for from COA. Federal work-study + state work-study + institutional work-study

Step 4: Subtract total money you plan to borrow from COA. Federal direct subsidized student loan + federal direct unsubsidized student loan + federal PLUS loan (for parents and graduate students)

The amount left over is your total gap to fill. You can use savings, additional scholarships, or borrow private loans to fill the gap

If you didn’t get as much aid as you hoped from a school, you can write a financial aid appeal letter or consider a less expensive school.

Remember, you don’t have to take all offered financial aid, but make sure to accept all free aid before borrowing money.


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