Getting a financial aid award letter is the first step in making a college admissions decision.
You’ve been accepted to your school of choice and have been awarded a financial aid package. This is certainly an exciting time, but once you open the financial aid award and begin reading, your excitement turns to confusion and frustration.
Welcome to the annual interpreting of your financial aid award. While there are some guidelines for schools to follow when creating financial aid awards, for whatever reason, there aren’t any strict standards on formatting. This often leaves many schools using unfamiliar formats and terminology.
Unfamiliar language and cryptic codes can be found throughout many financial aid awards. Loans and grants can be lumped together. Codes such as “L” or “LN” are sometimes the only indication that an amount is actually a loan. In fact, most financial aid students receive come in the form of student loans.
Additionally, the true cost of attending the school is often underestimated on award letters. This can leave students constantly coming up short on funds to pay for school. In this article, you’ll learn how to understand your financial aid award.
Sample Financial Aid Award Letter
Here's a sample financial aid award letter to help you understand what you're receiving. This one is from UC Merced, but it's very similar to what you'll receive from any college.
It starts with gift aid at the top (grants and scholarships), then has loans and work-study programs, and then it shows what you'll actually pay at the bottom.
Cost of College Terminology
Understanding the terms used to describe the cost of college can help you better interpret your award letter and ask questions when something doesn’t seem to make sense.
Starting with “net cost,” this is the difference between the cost of attendance (all college costs) and the total financial aid award. For example:
Cost of Attendance
- $45,000: Tuition & Fees
- $15,000: Room & Board
- $2,000: Books & Supplies
- $1,000: Transportation
- $3,500: Miscellaneous
$66,500: Total
Financial Aid Package
- $6,000: Fed Pell Grant
- $2,500: Federal Perkins L.
- $13,000: Parent Plus L.
- $8,000: Fed Unsub Staf
$29,500: Total
$37,000: Expected Net Cost
From the above, net cost subtracts out all forms of financial aid, of which there are two:
- Gift aid: Scholarships and grants (money that doesn’t have to be repaid)
- Self-help aid: Loans and student work studies (money that must be repaid)
The formula for “net cost” is: Net cost = cost of attendance − (full) financial aid.
Net price subtracts out only gift aid. Using the above example, it will look like this:
Cost of Attendance
- $45,000: Tuition & Fees
- $15,000: Room & Board
- $2,000: Books & Supplies
- $1,000: Transportation
- $3,500: Miscellaneous
$66,500: Total
Gift Aid
- $6,000: Fed Pell Grant
$6,000: Total
$60,500: Expected Net Price
The formula for “net price” is: Net price = cost of attendance − gift aid.
What do the differences between net cost and net price mean? Net cost can give the impression that financial aid is covering more cost than in net price. This is misleading. The student will still have to pay back any loans or participate in work-study programs that are included in net cost.
Net price can be thought of as the discount sticker price on college cost. This is the number that you will need to somehow pay for.
Depending on the award letter, net cost or net price will be used. Don’t let either throw you off. Now you know what is involved in arriving at both numbers.
"Student Aid Index (SAI)" is another number that might be buried in your award letter. That can be included in the net cost number since it is money that the student must come up with.
You can check out this Net Price Calculator here.
Arriving at the True Cost of College
No matter what your award letter looks like, it is not likely to show the true cost of college. In the examples above, the cost of attendance has several line items included. Don’t be surprised if your school only lists tuition and fees. This can leave out $20K in cost once other expenses are added back in.
If the school is calculating net price based on only two line items for the cost of attendance, this will be grossly underestimated. Many students are caught off guard by this fact and only realize it once they are a few months into their education.
This creates a situation where a student is scrambling to find some way to finance various costs associated with their education. In the worst case, some students simply give up and leave school.
Front-Loading and Private Scholarships
Be aware that some colleges offer higher gift aid during the first year and much less after that. This is a practice referred to as "front-loading." Check with the financial aid office for more information if this is something the school does. You might not get a straight answer. In that case, the U.S. Department of Education’s College Navigator can be of some help. Either way, do your best to get an answer so that you can plan properly.
If you are receiving private scholarships, they can have a negative impact on your needs-based financial aid. Depending on the school, either your gift aid or self-help aid may be reduced. Again, you’ll want to check with the school on what impact any private scholarships may have on your financial aid.
Is Your Financial Aid Award "Good"?
Now that you know how to read your financial aid award, the real question that emerges: how do I know if I actually am getting a good financial aid award?
It's really hard to know! You know that some students are paying full price, and you know there are students getting a full-ride scholarship. But most students pay somewhere in the middle.
An easy way to see if you're getting a good financial aid award is to use a free tool like TuitionFit. TuitionFit anonymously aggregates financial aid awards, and then shows you where you stand. All you have to do is upload your own award, and they'll tell you how it compares.
How To Appeal Your Financial Aid Award
You’ve received your fat admissions packet, toured the campus, and even bought a t-shirt, but your financial aid package falls short of expectations. Maybe you didn’t get any scholarships or grants – just student loans. Or maybe you were expecting an amount much larger than what was offered.
It’s important to note that appealing a financial aid award successfully is pretty rare. However, it doesn’t mean you can’t try. And the earlier you try, the better. Here’s what you need to do appeal your financial aid.
Set Up An Appointment With A Financial Aid Officer
Before you appeal a financial aid award, check out your school’s financial aid website. Bigger schools usually publish a formal process for appealing financial aid decisions. If the school has the process published, follow it. Smaller schools might not have the process published. In that case, call to set up an appointment.
Once you know your school’s policies, reach out. It’s better to call than to email a financial aid officer. Why? It’s easy for overworked financial aid officers to miss an email or even two. A few people can serve thousands or tens of thousands of students.
When you call, request an appointment to meet with a financial aid officer. An in person meeting is the best way to get a financial aid officer to become your advocate. If you can’t meet in person, set up a phone call to review your award.
While you’re making calls, consider calling the admissions office too. The admissions office may have information about unclaimed merit scholarships that can help you out.
Prepare For Your Meeting
When you meet with a financial aid officer, you’ll request a reassessment of your financial aid award. If you’re going to get more aid, you’re going to need to prepare.
These are a few things you need to know prior to your meeting:
- How is your school calculating expected family contributions? Your university may use the EFC number from your FAFSA, or they might use a number calculated from the CSS Profile. Either way, you need to know how much your university expects from your family
- What do you and your parents think is your unmet need? Have a specific number in mind.
- Gather documentation that shows why you and your parents can’t cover the gap. A family budget, or documentation of a family change (such as divorce, job loss, etc.) goes a long way in altering aid.
- Do you have a better package elsewhere? A school may increase your merit aid if they know another school offered you more money.
- Did your situation change from when you first applied? This can be helpful in understanding any changes.
What To Discuss
During the meeting with a financial aid officer, you need to be careful about how you conduct yourself. Financial aid officers aren’t going to feel comfortable calling the meeting a negotiation. You and your parents need to be careful to keep the tone of the meeting assertive but non-confrontational. You want the financial aid officer to become an advocate and a partner with you.
Start the meeting by saying, “I would like you to reassess my financial aid awards package because (reason 1) and (reason 2).” Would you like to see documentation about these reasons?
Then, take the time to listen. You should view the financial aid officer as a partner. The financial aid officer should be able to explain what they can do, and what they cannot do. If you’re an accepted student, they want to work with you. However, if enrollment is high they might not have more merit awards or subsidized loans to offer.
If the financial aid officer is unable to offer grants, bursaries, or scholarships ask them to keep an ear out for opportunities. Remember, a financial aid officer is your advocate not your adversary.
Most of the time, a financial aid officer won’t give a definitive answer about adjusting financial aid during the first meeting. Instead of pressing for an immediate answer, ask when and how you should follow up with them.
How To Follow Up After
Once you’re done with the meeting, thank the financial aid officer and promptly follow up with any documentation they requested. Sending a thank you note through the mail is also a thoughtful gesture.
If you don’t hear back about a reassessment, follow up via email and a phone call. The financial aid officer might not adjust your award, but they should tell you a definitive yes or no.
Students who don’t get enough aid from their school still have options. Some schools will push you to expensive private loans, but those should be a last resort. Consider these options first. You can work more during your education. You can choose a less expensive school. You can defer enrollment for a semester to work and save money. Finally, you can find outside grants and scholarships.
If you end up enrolling at the school, keep in touch with the financial aid officer. They can help you navigate tuition hikes and changes to their aid policies. College lasts four years, and you need to prepare for all four years.
Final Thoughts
Navigating your financial aid award can be difficult and confusing. They don't make paying for college easy! However, you owe it to yourself to work hard to get any free money you can to pay for school.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared toward anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications, including the New York Times, Wall Street Journal, Washington Post, ABC, NBC, Today, and more. He is also a regular contributor to Forbes.
Editor: Clint Proctor Reviewed by: Claire Tak