Receiving a college acceptance letter is exciting! We love acceptance letters! Soon after, the financial aid award letter arrives, which can be equally as important. While this letter outlines the financial aid a college is offering, it can also be confusing and difficult to interpret.
Many families struggle with how to read a financial aid award letter, especially because colleges present their aid packages in different formats. Grants, scholarships, loans, and work-study are often listed together, which can be deceiving, making it difficult to determine the true cost of attending a school.
Understanding how to read and compare financial aid award letters can help students make informed decisions, avoid unnecessary debt, and choose the college that is the best financial fit. This guide explains how to evaluate a financial aid package and calculate the real cost of college.
What Is a Financial Aid Award Letter?
A financial aid award letter is an official document from a college, found on the student’s applicant portal, that explains the financial assistance a student is eligible to receive for the upcoming academic year.
Students receive these letters after they are admitted and after their financial aid application(s), the Free Application for Federal Student Aid (FAFSA), and if required, the CSS Profile, have been processed.
Although each school may use its own format, most contain the same key information:
- The cost of attendance
- Types of financial aid offered
- The remaining amount that students and families may need to pay
I want to help you interpret these sections so you can understand what you are being offered and easily compare college costs across multiple schools.
Step 1: Understand the Cost of Attendance
The first section details the Cost of Attendance (COA). This represents the college’s estimate of the total cost for one academic year.
The cost of attendance is divided into two categories: direct and indirect costs. Direct costs include billable items such as:
- Tuition and mandatory fees
- Housing and meals (room and board)
Indirect costs are items that will not be on your bill, but they are real costs. They will vary by school and by student, but they are important to consider. The school will offer estimates to help families budget. Indirect costs include:
- Books and supplies
- Transportation
- Personal expenses
When learning how to calculate the cost of college, the cost of attendance provides the starting point before financial aid is applied. Continued…
If you found this information helpful, click the link below to read the full article on Substack and subscribe to our free newsletter!