What Your College Financial Aid Letter Isn't Telling You
What you don’t know can hurt your bank account
College applications are done, and if things went well, you and your child are high-fiving as acceptance letters come in. But for many families, the hard conversations start when the official financial award letters arrive, typically in late March or early April. A college’s lean financial aid package can be a deal breaker.
Unfortunately, these letters may obscure key information, so
it’s important to read them carefully. Here are three key pieces of information
to look for.
Related: 4 Reasons to
File the FAFSA Early
1. Total cost. A good financial aid
letter includes
cost of attendance (COA) — that’s the entire cost for one year — and clearly
lists all fees: tuition, room/board, textbooks, transportation and personal
costs. But nearly one-third of financial aid letters fail to include the COA according
to David Levy, editor of
Edvisors, an
online resource for families planning for college. They sometimes omit
room/board fees and may not include the “indirect costs” of textbooks, personal
expenses and transportation, says Levy.
2. A list of grants and loan. Some
letters mix grants and
student
loans, leaving families confused about what is gift aid and what will need
to be paid back. Sometimes loans aren’t clearly marked as loans, making the
college look more affordable than it is, Levy says. Also, the letters almost
never include information about loan terms.
3. A “net price.” The net cost is the
COA minus all aid offered. Sometimes, letters will present a net cost figure
that looks appealing but may be misleading. Look closer and you may realize most
of the aid is loans, Edvisors says.
Instead,
compare each college’s “net price,” which is the COA minus grants and
scholarships only. The resulting number reflects the true cost for your family,
Edvisors says.
For example,
if a private college’s COA is $60,000, and it offers $32,000 in need-based aid
and scholarship, your family needs to come up with $28,000 from savings, income
and loans. If you know your
“expected family contribution,”
(EFC) you’ll know if the award is realistic for your family. If your EFC is
$18,000, this college isn’t meeting your full demonstrated need (most colleges won’t).
Financial aid letters rarely include your EFC, but you should know it to
understand what you can afford, Levy says.
To sort out confusing
letters, use the federal government’s
Financial Aid Shopping Sheet template to identify the net price for each college and
compare apples to apples.
College Abacus,
a website for families to compare costs before applying, can also help sort out
financial aid awards after acceptance for most colleges.
Related: How
Much Money Should I Save for College?
Don’t get excited just yet
Even if an
institution’s costs look manageable, be sure to ask questions before your student
gets too attached. Here’s why.
Approximately
half of all colleges “front-load” their grants and scholarships to freshman, Levy
says. That means colleges give a larger gift award the first year and less in
subsequent years. Ask the financial aid office if your student will receive the
same package after freshman year (if family status and finances remain the same).
Also, ask if a certain grade point average must be maintained, Levy recommends.
Analyze the
college’s fees over a period of years and find out if grants increase when fees
go up. The
National Center for Education Statistics College Navigator offers all kinds of data on colleges
and lets you compare several years of your favorite colleges’ tuition hikes.
Lastly, ask
how outside scholarships affect financial aid. Many colleges reduce aid by the
amount of the scholarship because of federal rules that require it, but
colleges have different
outside scholarship
policies, according to
Edvisors.
Related: Parents of High Schoolers: How Your Base Year Affects College Financial Aid
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