How to read the financial aid award letter

You will receive a scholarship award letter shortly after you receive your university admission letter. You need to decide which school gives you the best rewards, but a better offer can be a challenge. Each letter contains a different language, format and content. An analysis of more than 500 financial aid award letters by New America, a non-partisan think-tank in 2018, found that there are many inconsistencies in the jargon of these letters. Moreover, more than one-third of the people did not include any cost information along with the amount of financial assistance.

In order to understand the content of each financial aid award letter, you need to overcome the confusion so that you can make the best financial decisions.

What should your award letter include?

No two financial aid award letters look like they are, but they should have:

1) List of funding types and amounts
Your assistance may include federal, state, and institutional grants, as well as federal work research and scholarships. The list will also include the amount of subsidies and non-subsidized federal loans that you can borrow, and usually, your parent or guardian can borrow for your education.
2) Your attendance fee

The attendance fee includes tuition, fees and room and board for the first year. But it is still not complete. It doesn't take into account all the fees you have to pay, nor does it take into account how many years you have to attend.

Determine the true cost of the university

Only 40% of the sample letters in the new US analysis contain calculations for the fees that students need to pay. In order to calculate the cost of the university by yourself, here are the things to do:

1) Find the net price
The net price is calculated as attendance, including additional fees, minus grants and scholarships. You can use the net price calculator on each college website. The net price includes estimated additional costs such as books and supplies, personal expenses and shipping costs.

2) Thinking after the first year

There is only one year of tuition fees in the net price factor. It also did not consider the increase in tuition fees, which is likely based on data from the National Center for Education Statistics. Multiply the net price by 4 to get the lowest total cost you expect. As the annual tuition increases, your costs will rise, but your financial assistance may not.

Understand the type of assistance

In an economic aid award letter, the way in which the aid award funds are marked does not indicate too much. For example, work-learning and loans may be referred to as “self-help assistance,” while scholarships and bursaries may be classified as “gift assistance.” In the new US study, 455 of the 455 non-subsidized loans offered were loan-specific terms, 24 of which did not even include the term “loan”.

Here's how to distinguish between different types of assistance in the award letter:

Grants and scholarships: rewards that do not need to be repaid. These can come from funding agencies of the federal government, schools, or state governments. They may be based on needs or values.
Work and study: The money you can earn, usually on an hourly basis, is funded by the government. But this is not guaranteed: you must find a qualified job that meets your academic schedule, and the amount on your winning letter is the highest amount you can earn.
Loan: You must pay interest on the borrowed money. You borrow a federal direct loan from the government. Compared to private student loans, these loans usually have lower interest rates and more protection for borrowers. Moreover, no credit check or joint signature is required.