Your financial aid award letters—often called “packages”—usually arrive in the spring of your senior year. They tell you what your college will offer you and what you’ll have to pay out-of-pocket or with loans. Each school you apply to will send you a letter after they’ve reviewed your FAFSA (Free Application for Federal Student Aid). The information may feel overwhelming at first, but once you know the terms, you can confidently decode your letters and make smart decisions!
Check out these key terms and tips to help you navigate your financial aid award letter(s):
Important Terms to Know 🔑
Cost of Attendance (COA) or Estimated Costs
The COA is the total estimated cost of attending a school for one year. This includes tuition, fees, room and board, books, transportation, and personal expenses. Every school calculates COA differently, so pay close attention to what’s included!
Direct Costs
This refers to the expenses you pay directly to the college, such as tuition, fees, and housing. It’s the core of what you’ll need to cover.
Additional Expenses/Indirect Costs
These costs may vary but are still important to consider. They include books and personal expenses. The good news is that financial aid (scholarships, grants, and loans) can help cover these, too!
Net Cost
This is the amount you’d pay to attend a college after your scholarships and grants are subtracted from the direct costs. It’s your out-of-pocket cost before loans and other aid.
Student Aid Index (SAI)
Your SAI is calculated based on your FAFSA information and helps determine how much financial aid you qualify for. Your SAI can change each year based on your financial situation.
Need
Your financial need is the difference between the COA and your SAI. Colleges use this to determine how much financial aid to offer you.
Available Aid/Total Financial Aid
This is the total amount of aid a college offers you for the academic year. It includes all scholarships, grants, loans, and work-study.
Types of Aid 💸
Gift Aid
This is the best aid because it doesn’t need to be repaid. Gift aid includes scholarships and grants.
Scholarships
Scholarships are funds you receive that don’t need to be repaid.
- Renewable scholarships can be awarded for multiple years (usually four years for a bachelor’s degree). They may have specific requirements like maintaining a certain GPA.
- Non-renewable scholarships are awarded for one term or year only.
Grants
Grants are often awarded based on financial need and, like scholarships, don’t need to be repaid. However, be sure to meet the specific requirements of grants like the TEACH Grant, which can convert into a loan if conditions aren’t met.
Direct Stafford Loans
These federal loans can help cover your college costs with lower interest rates than private loans. There are two types:
- Subsidized Loans: The government covers the interest while you’re in school.
- Unsubsidized Loans: Interest starts accruing as soon as the loan is disbursed. If you can, start paying interest early.
PLUS Loans
PLUS stands for “Parent Loan for Undergraduate Students.” You parents can apply for this loan if there’s a gap in your aid. It’s in their name and requires a credit check. If they’re denied, you might qualify for additional federal loans.
Work-Study
If you’re eligible for work-study (determined by FAFSA), you can earn money by working part-time, usually on campus. It’s a great way to help with expenses while gaining work experience!
Expected Family Contribution (EFC)
This term is being phased out, but you may still see it used in exchange for net cost. It’s a measure of how much your family is expected to contribute to your education costs.
Private Loans
If federal aid isn’t enough, private loans can help fill the gap. But be careful—these loans often come with higher interest rates and fewer repayment options, so use them as a last resort.
Loan Servicer
This is the company that manages your federal loans once they’re disbursed. They’ll handle your repayment. It’s important to stay in contact with them!
Final Tips for Success 📝
Taking control of your financial aid options is empowering! Carefully review each package. If you have questions, talk to your financial aid office. Only borrow what you truly need. You have the power to choose the aid that works best for you—and it’s all about making informed decisions that set you up for success!