When paying for college, make sure you understand your financial aid offer. This letter spells out the details of your financial aid package and what you will be expected to pay out-of-pocket.
First, how do you get a financial aid offer letter? To get a financial award letter from your selected college(s), you must first submit your application for financial aid. This is called the Free Application for Federal Student Aid or more commonly known as FAFSA. The FAFSA form allows you to request federal grants, work-study opportunities, and student loans all in. The FAFSA should be completed by everyone, not just those who are seeking financial assistance.
In early spring, you should start to receive financial award letters from the colleges you applied to. The letter will inform you of the details of your financial aid package.
Generally, although there is no one standard format, the letter should cover 3 key areas:
- The cost of attendance
- Your expected family contribution
- Details and amounts of any grants, scholarships, work-study opportunities, and loans for which you qualify
The cost of attendance (COA) is an estimation of what the school has determined a student will pay in tuition, fees, books, classroom supplies, transportation, and room and board.
The expected family contribution (EFC) is the numerical value the college uses to determine how much financial aid you qualify for. Basically, the lower your expected family contribution is, the more assistance you qualify for. This also helps determine your subsidized, unsubsidized, and Direct PLUS loans. Keep in mind, these are loans and will need to be paid back.
Your letter will tell you the types and amounts of financial aid that you do not have to pay back. Such as:
- Grants – Typically need-based and can come from the federal or state government, the college, or a private or non-profit organization.
- Scholarships – Typically merit-based (academic or athletic). Scholarships are offered by schools, employers, individuals, companies, communities, civic organizations, and more. Many scholarships require a separate application outside of the FAFSA.
- Work-Study opportunities – This is a job arranged by your university to earn money to help pay for educational expenses.
Your letter will also present the types of financial aid that you are required to pay pack. These loans include:
- Direct subsidized
- Direct unsubsidized
- Direct PLUS Loans
The amount that remains after you deduct the financial aid that you do not have to pay back and any federal loans, is the amount that you will need to pay out of pocket or will need to pay by obtaining a private student loan.
After reviewing your financial award letter, if any areas are unclear, start a conversation with the financial aid office of your selected college(s).
