Happy November! Has your child received their award letters yet? Award letters should be coming soon if you filed the FAFSA when it was released in October. What is an award letter? I’m glad you asked.
For the month of November we will be doing a four part series on the financial aid award letter. I know fun stuff right? In this series you will learn about what an award letter is, cost of attendance vs. direct cost, the 4 types of financial aid, and how to compare award letters from each school. The goal of this series is to help you and your student make informed decisions about paying for college by knowing how to understand award letters.
So let’s get to it. What is an award letter? An award letter, offering various types of financial aid, is a document sent to your student from colleges in which he/she applied. This letter is sent once the financial aid office has evaluated the student’s FAFSA as well as other applications in order to determine the student’s aid eligibility.
Most award letters will be broken into three main sections. The letter should outline the aid offered to your student, the cost to attend the institution, and what you should expect to pay if he or she chooses to attend. Award letters are usually separated into three columns; a fall and spring semester column and then a yearly totals column.
Awarded Financial Aid
The financial aid office determines what financial aid to offer your student based on the institution’s cost of attendance and the information you and your student submitted on the FAFSA. The cost of attendance is a calculated estimate of expenses that your student may incur while attending school. Each institution has a different cost of attendance that is determined and set by the financial aid office and other departments within the institution. There are four main types of financial aid that could be listed on your student’s award letter. Not everyone receives these four types of aid. Financial aid is determined by many factors such as finances, GPA, resident state, and institution. With that said not every award letter will look the same nor will have the same award amounts.
Cost to Attend
The amount listed under the cost to attend section will vary from school to school. One reason the amount will vary is one school could be using cost of attendance while another school could be using direct cost. The direct cost is the actual amount it will cost your student to attend school. Direct cost is not an estimate it is the actual price of the institution where your student is interested in attending. Secondly, this is a given, the amount listed under the cost to attend section will vary because some colleges are more expensive than others. Private institutions will be more expensive than public institutions. There are many factors that go into the cost of an institution such as size, region, state, and donors only to name a few.
The amount in this section is what the institution expects you to pay in order for your student to be enrolled there. The amount you see in this section is the awarded financial aid minus the cost to attend. Please don’t stop there. This is not an accurate calculation of what you will owe. First, if your student qualifies for federal work study, it is not a guaranteed fixed income. Your student may not work the amount of hours nor receive the hourly rate that is representative of the amount listed on the award letter. Secondly, some schools add the Parent PLUS Loan to the list of awarded aid. In order to qualify for Parent PLUS loan in particular a credit check is required and you the parent will be approved for a certain amount. It is very important to use direct cost when calculating your estimated cost to attend college.
Knowing how to read an award letter is crucial in helping to determine how you plan to pay for your child’s education. It is important to break down each award letter and compare the award letters “apples to apples” as we like to say. Paying for college is a big investment. Know how much it will cost you before accepting anything.
Keep a look out for the next blog post in this series. It will be about cost of attendance vs. direct cost.
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