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How to Read your Financial Aid Award Letter

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If you applied for financial aid, you will receive or should soon have your financial aid award letters in hand. Most schools send them out the 1st of April, although the letters may trickle in throughout April and into early May.

Unfortunately, there is not a uniform format that all schools follow, so comparing your offers may seem a bit daunting. Here’s a quick rundown on what to look for and how to convert the letters into a common language so that you can make sense of what you are being offered — and what you will still need to fund.

What you need to look for
When you open each letter, you should be looking for three essential pieces of information:

1)    How much total financial aid you have been awarded
2)    How much of this aid is in scholarship, college grants or federal work study — i.e. money that does NOT have to be repaid — and how much of it is in loans — i.e. money that does have to be repaid.
3)    How much need is unmet, which you or your parents will need to cover out of pocket or with other funding sources (like private scholarships or private loans)

Every school labels these pieces a bit differently, so you will need to decode their lingo. For example, some schools refer to loans as “financial aid” while others just call them by their name (Stafford Loan, Perkins Loan, PLUS loan, etc.)

Note that most schools build in a “family contribution” amount — this does not necessarily equal #3, AKA the “unmet need”. In other words, a school could estimate its total annual costs at $20,000 and your family contribution at $5,000. The school could then offer you $10,000 in some combination of school or state scholarships, education grants and student loans. But there would still be $5,000 in costs unaccounted for, which would mean that your family contribution is actually more like $10,000 — even though the letter doesn’t say that.

Think of it this way: Unmet need is the school’s way of telling you, “We know you probably can’t afford to pay anymore than your family contribution based on your FAFSA, but we have no other resources to give you.” The bottom line is that the “unmet need” portion is your and your family’s responsibility, just as much as the “family contribution” portion.

Stay tuned on Wednesday, when I look at how to calculate your real costs of attending a particular school.

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