Around this time of year, families receive a financial aid letter (also known as a financial aid package or financial aid offer) from their chosen schools. This can be a rather frustrating experience as there is no set format and terminology across schools. Not only that, the stakes are high as family try to decipher how much they owe for the upcoming school year.

What is a financial aid letter?

A financial aid letter is a formal offer of financial aid from your school. In fact, it is typically the vehicle to not only view, but also officially accept the federal and institutional financial aid offered to you by the college and U.S. government. Additionally, it contains a description of the full cost of attendance, which includes tuition, fees, room and board (if applicable), books, personal and transportation expenses. This is the only time you will have a realistic understanding of what a school will cost you in black and white, dollars and cents.

Keep in mind not everything listed on a financial aid letter is a direct cost. In other words, not everything listed within the full cost of attendance needs to be paid directly to the school or bookstore. For example, personal expenses are a good estimate for the budget, but not a direct payment to the school. The amount actually incurred with vary by student. Don’t forget this important fact when you’re planning out how to gather funds for the first semester’s payment, or you might overestimate.

Do you a sample letter I can view?

Here is a sample financial aid letter published by the Department of Education I will reference throughout this post. Feel free to follow along with me as we take it piece-by-piece.

What’s in a financial aid letter?

You can see the first main section of this letter outlines the school’s full cost of attendance broken out into the main categories, consisting of direct and indirect costs. Undoubtedly, the largest categories will be tuition/fees and room/board. Our example school here has a full cost of $20,394/year.

After this, the college outlines its financial aid offerings to you. Note that these funds typically originate from the school and the government. Our example here shows a Pell Grant (money that does not have to be paid back) two loans (money that has to be paid back) and finally a student cash payment. I’ve never seen that last category in practice; it’s more common to see additional loan types (a Parent PLUS loan) or scholarships from the school.

Don’t let time periods throw you off, either. Sometimes aid is listed on an annual or semester-by-semester basis. It’s not uncommon for families think they received less aid than they have because they are assuming a semester’s amount is the allocation for the entire year. Our example letter breaks up the aid offered by semester and annual total.

What are the terms I should keep an eye out for?

Scholarships – money that does not have to be paid back, given the student meets the ongoing requirements

Grants – money that does not have to be paid back

Loans – money that has to be paid back, typically with interest

Subsidized – the government pays for the interest on these loans while the student is in school and maintains the required enrollment status. These take into account a family’s financial need.

Subsidized – interest begins to accrue on these loans once it is taken out. These do not take into account a family’s financial need.

Parent PLUS – a loan offered to the parents that requires additional financial eligibility requirements, like a credit check. It also carries a higher interest rate than the loans offered to an undergraduate student.

Want to go over your financial aid letter with a professional? Contact us today.

Looking for more examples?

Check out this PDF from the Network of College Success at the University of Chicago.

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