Being accepted to more than one college is a tremendous accomplishment. But it also means that you have options and a big decision to make … you’ll need to pick the college that best fits you. For many students, this decision is based on the school’s total cost. Financial aid offers (sometimes referred to as “award letters”) provide you with the information you will need to figure this out.

Award process and notification
After you complete the Free Application for Federal Student Aid (FAFSA), the college(s) you have applied to will use that information to determine your eligibility for federal, state, and institutional aid. Usually by April or May, the financial aid office will send you an offer. The offer may arrive by mail or email, or you may be notified that you need to view the information through the school’s portal.

An image of a borrower reviewing a financial aid award letter.Award offer basics
Financial aid award offers include important information such as how much a school costs, the financial aid you are eligible to receive, and the amount you will need to pay out of pocket. Since the cost of attending college usually plays a huge part in determining the school you will attend, it is very important to understand how to read your offers. And this can be challenging.

One of the complicating factors is that there is no standard format for offers. Colleges often include different information on their offers. Or, the information could be the same, just arranged differently. Also, the terms of the award can make it hard to compare offers and decide which school has the best offer for you.

Cost of attending a college
The main purpose of understanding your offer is to figure out what college is going to cost, or the “net price.” This is the amount you will be responsible for paying out of your own pocket. The net price is determined by taking the cost of attendance (COA) and subtracting any aid you will be receiving that you do not have to pay back. The COA is an estimate of what you can expect to pay for one year of school. Some schools may not include the COA on their offer, leaving you to either look it up on the school’s website or call the financial aid office. Once you have determined the COA, you are better prepared to consider the aid you will be receiving.

The COA can include both direct and indirect costs. Direct costs include charges which are paid directly to the school such as tuition, fees, and room and board if you are living on campus. Indirect costs may also be listed. These are expenses that should be taken into consideration, such as books, transportation, and personal expenses. Depending on your situation, your indirect costs may differ from the school’s estimate. Personal decisions like renting books instead of buying them, how often you travel back home, and your budget for personal items can affect your indirect costs. If you are living in off-campus housing, you will also want to consider rent, utilities, and food into your indirect costs.

Types of financial aid
There are two types of financial aid that will be included on your offer: financial aid that you DON’T have to pay back and financial aid that you DO have to pay back. Understanding the difference is crucial when deciding what college to attend. Schools may provide you with the same amount of aid, but it is important to compare what type of aid it is, free aid vs. aid you will be paying back after you graduate.

Financial aid awards that do not have to be repaid may be listed as grants, scholarships, or gift aid. Sometimes this aid is based on your financial need or sometimes you may have to meet certain requirements to get and keep that money from year to year. If you are not sure if the grants or scholarships listed will be given to you for the whole time you attend that school, make sure you check with the financial aid office. You want to be sure you can afford college for each year you will be attending and not just the first year.

Work-study is another type of aid that may be listed on your offer if you qualify. This is a program where you work to earn money to pay for college. Work-study jobs are typically on campus, and you receive a paycheck, just like a regular job. It is important to understand that some schools will list work-study as free aid. Even though you don’t have to pay it back, you do have to work for this money and it is not provided up front. In order for you to be able to subtract it from your COA, you have to make sure that when you get paid, that money goes toward your school expenses.

The other type of aid that may be listed on your offer is student loans. This is aid that you will have to pay back, with interest. Federal Direct Loans are loans from the government that do not require a co-signer or credit check. Direct Loans may be shown as two different types, subsidized (need-based and does NOT accrue interest while you’re in school) and unsubsidized (not need-based and DOES accrue interest while you’re in school).

Since you have to repay loans after you leave school, be sure to consider the total amount you will need to borrow throughout your college career. In addition, consider the loan interest rates and what the payments will be when it’s time to pay them back. Those items are not usually listed on an offer. Current interest rates can be found here and this Loan Calculator can be used to estimate your future monthly payments. Offers may also list loans that your parents can get for you (Direct PLUS Loan) or private student loans. If you need these additional loans to pay for college, remember that these types of loans often have higher interest rates and are subject to credit approval.

Wrapping up
Although figuring out how to pay for college can be overwhelming, knowing how to read and understand your Financial Aid Offer can help you decide which school is best for you. Since this is such a major decision, do not hesitate to call the school’s financial aid office if you have questions.

Photo of Financial Coach Jessica.About Jessica

After earning a Bachelor’s Degree in Sociology, I have spent the past 5 years advising students about financial aid process and the options available to keep them from getting behind on their student loans. I would like to share my knowledge with you.  I want to help you and students like you have a better understanding of your finances, provide guidance on ways to effectively manage your money, and offer you the support and encouragement needed to be successful.

This service is not intended to constitute any tax, investment or legal advice. If you need investment, legal, tax advice, and/or credit counseling, please consult with a professional within those areas.

Links to third-party financial resources are provided as a convenience for informational purposes only. Trellis Company does not endorse or approve any of the products, services or opinions of the entities or individuals associated with these links.  Trellis Company bears no responsibility for the accuracy, legality or content of any external site associated with the links provided or any subsequent links.

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