Your financial aid award letter, which is the notification your school sends you to let you know what financial aid you are being offered for the upcoming school year, can sometimes be difficult to understand. When you receive the award letter, read it carefully, make sure you understand each piece of the letter, and respond to the letter to accept all or part of the award.
Before listing the financial aid package the school is offering, the school will typically have a section that outlines your financial need, on which the award is based. The school lists the cost of attendance, which is an estimate of how much, in total, it will cost for you to attend school. This not only includes tuition and fees, but also room and board on campus or an off-campus allowance, transportation, books, supplies and an allowance for personal expenses. The school then subtracts your expected family contribution, which is how much your family should be able to put toward those costs, based on the responses you entered on the financial aid application. The school subtracts your family contribution from the cost of attendance to calculate your financial need, which is the maximum amount of money the school will award in your financial aid package.
Your award letter will list all of the grants, scholarships, work-study awards, and loans that you are being offered from all sources. These include federal aid, state aid, institutional aid, and outside scholarships or grants. Some of the most common federal aid components include subsidized Stafford and Perkins Loans, unsubsidized Stafford and PLUS Loans, Pell Grants, FSEOG grants, TEACH grants, and work-study awards.
Grants are the best type of aid, followed by subsidized loans, work-study, and unsubsidized loans. Some schools might use abbreviations to identify some elements of the award, so call the financial aid office if you cannot decipher some of the abbreviations or can't tell what type of aid is being offered. If you have any outside financial aid awards that do not appear on the letter, contact the school right away to have them added. Most schools will eliminate some of your loans to adjust the award.
When you are a prospective student comparing financial aid offers from multiple schools, look at a few factors beyond the overall amount of aid each school gives. Because schools vary in their cost of attendance, you should subtract your total financial aid offer from the cost of attendance to find out how much it will cost you out-of-pocket to go to each school.
Other factors to compare are the amounts of gift aid, such as scholarships and grants, and the amounts of other aid, such as loans and work-study. Subtract the gift aid from the cost of attendance to estimate the felt cost of attending each school. Some schools do not list non need-based loans, such as unsubsidized Stafford Loans and PLUS Loans, on the award letter, so also consider how adding those would change the financial aid package. In most cases, you will be able to add these loans, as long as they do not exceed your cost of attendance.