I love March for many reasons: basketball, college acceptances, and financial aid award letters! After you’ve been accepted to college and submitted all necessary financial documents, such as the FAFSA, CSS Profile and any additional documents required by your college, you’ll receive a financial aid award letter listing the amount of grants, loans and scholarships offered to you from the school. I posted this overview last year, but it deserves a repost because money is important, ya know?
How you receive the letter depends on the school — it could be mailed to you, emailed to you, or on the school’s student portal. The college may not even notify you when your award letter is ready, so keep a close eye out for it and call the school if you have questions. Every award letter looks different, so read it carefully and see me to understand what it means.
For the most part, your financial aid award letter will list all federal, state and institutional (aka college) grants and scholarships. It may be broken down by each semester, but assuming that you’ll remain at the school for the entire academic year, you’ll want to pay attention to the total award amount for the 2018-19 award. Here’s an example of an award letter:
Sample Award Letter: XYZ University
Estimated Cost of Attendance for 2018-19: $35,000
| Award |
Fall 2018 |
Spring 2019 |
2018-19 TOTAL |
| Federal Pell Grant |
$2,960 |
$2,960 |
$5,920 |
| University Scholarship |
$3,000 |
$3,000 |
$6,000 |
| Virginia State Grant |
$1,500 |
$1,500 |
$3,000 |
| University Grant |
$4,000 |
$4,000 |
$8,000 |
| Federal Direct Subsidized Loan |
$1,750 |
$1,750 |
$3,500 |
| Federal Unsubsidized Loan |
$1,000 |
$1,000 |
$2,000 |
| Parent PLUS Loan |
$2,890 |
$2,890 |
$5,780 |
| Federal Work Study |
$400 |
$400 |
$800 |
TOTAL Financial Aid Award for 2017-18 = $35,000
Let’s break it down!
At first glance, this award letter looks great right? Your total amount is $35,000 which is the same as the cost of attendance. So you pay nothing! Woo!
To quote Beyonce, hold up. Pay close attention to the TYPE of award they give you. No award is created equal and each one has different repayment conditions. Now, let’s go step-by-step and figure out how much they’re really giving you…
The Grants and Scholarships:
First, pay attention to everything that’s categorized as a “grant” and “scholarship.” These are the best kind of financial aid offers because it’s essentially “free money.” Grants are based on financial need whereas scholarships are determined by merit (academics, talent, athletic ability etc.).
As we can see, this student qualifies for the Federal Pell Grant ($5,920), University Scholarship ($6,000), Virginia State Grant ($3,000) and University Grant ($8,000). If we add all of that up we get $22,920. That amount of money is what the student does NOT need to pay back to the school, state or government. This is great! That’s $22,920 taken off the cost of attendance which brings us down to $12,080.
The Loans:
Unlike grants and scholarships, loans are money you DO need to pay back eventually. Loans come with interest rates, which means the amount you’re required to pay back grows over time. Every loan has different interest rates and repayment conditions. On this award letter, there are 3 types of loans – the Federal Direct Subsidized Loan, Federal Unsubsidized Loan, and the Parent PLUS Loan.
- Federal Direct Subsidized Loan: A loan for which the federal government pays the interest on the loan while the student is in school. Once the student graduates or leaves school, they are responsible for repaying the loan and interest. The maximum amount that a freshman college student can take out in subsidized loans is $3,500. There is a 6-month grace period where you’re able to find a job after college before repaying the loan. The interest rate is 4.45%
- Federal Unsubsidized Loan: A loan for which the student is responsible for paying the interest as it grows while he/she is in school. The maximum amount a freshman student can take out is $2,000. There is also a 6-month grace period and the interest rate is 4.45%
- Parent PLUS Loan: A loan taken out by the parent NOT the student. This loan amount can vary based on how much the school offers. Oftentimes, schools will add the parent PLUS loan to your award letter to make it seem like your financial aid covers everything. Sneaky right? RIGHT. Don’t be fooled! Parent PLUS Loans have high interest rates (7%) and you’re responsible for paying off that interest as it grows. Also there is no grace period, so you have to start paying off the loan immediately.
So if we go back to the award letter, we see that if the student took out all of the loans offered by the school, that’ll cover another $11,280 which is pretty great, except for the fact that the student will have to pay back those loans with interest and some of it (*cough cough* Parent PLUS loan) will have very high interest rates that may increase over the years.
Tldr; only take out the loans you need and can afford. If you are going to take out a loan, I recommend the Federal Direct Subsidized Loan because the government pays the interest while you’re in school, the interest rate is low, and you have a 6-month grace period after you graduate from college. Assuming this student takes out the maximum amount of subsidized loans ($3,500), we can bring the cost of attendance down to $8,580.
This $8,580 is the amount the student or student’s family must pay out-of-pocket for the first year of college. It is a lot of money, but manageable if you receive scholarships that can cover the remainder of the bill. Outside scholarships from national organizations or local community members can create a big difference when it comes to paying for college. Many colleges also offer payment plans, so oftentimes you’re not expected to pay the full amount right away.
What about Work Study?
Oh right! Federal Work Study is also listed on the award letter at $800. Work Study is a federal student aid program that provides part-time employment while the student is in school to help pay for education expenses. The amount varies based on a student’s financial need, but whatever amount is offered is the maximum amount you can put towards your education expenses. You cannot earn more than what’s offered to you and the job is not guaranteed. The student is responsible for finding a job on campus and oftentimes there are more work study students than jobs available. When calculating the amount you pay, understand that you won’t receive that work study money right away. Work study is an option. If you don’t qualify for work study, you can still get a part-time job on or off-campus.
Conclusion
The financial aid award letter can seem overwhelming and confusing. But if you break it down step-by-step, you’ll get a better idea of how much you need to pay for college. Now that you’ve gotten an overview about financial aid award letters, take a look at your letter and see me if you have any confusion or want to confirm the information is correct.
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