Understanding Your Financial Aid Award Letter

February 26, 2019
financial aid

Sometimes, it seems like the excitement surrounding college applications is sapped by the dread of financial aid. Not only do letters vary in language and structure, but they also determine one’s eligibility to attend school. It’s a daunting process. In order to alleviate the situation, we aim to clarify the process and bring some understanding to financial aid letters.

What Is FAFSA?

FAFSA stands for Free Application for Federal Student Aid. The information extracted from this application is used in conjunction with each school’s financial aid resources. Together, these entities determine each student’s eligibility for need-based financial aid, among other things.  

Understanding the Financial Aid Award Letter

Do not be discouraged. Understanding your financial aid award letter is not as scary as you may think. Letters include vital information about the cost of each school’s tuition, as well as the aid package you can expect to receive in your first year of attendance. We can break that down further into direct costs and Cost of Attendance (COA).

  • Direct costs include things like tuition, meal plans, and room and board. Charges like this are billed directly to students or their families.
  • COA refers to the entire cost of attendance, including extra necessities like books and personal expenses.

Scholarships and grants, which can be found in this letter, are awards that are given out by state and federal governments. These awards are gifts, and therefore do not have to be paid back like a loan. Scholarships and grants are generally awarded for merit or are based on income.

To determine your Net Cost, or the amount that you owe the school after gifts, subtract the total number combined from scholarships and grants from the direct costs. This is what you will owe the school. It is entirely possible to apply for additional scholarships outside of the ones listed on a financial aid letter. If awarded, you can subtract these amounts from the direct costs as well.

Student Loans

They sound scary and super adult, but they don’t have to be. It’s best to know up front what a loan is, where you get one, and what is expected of you once you have one (or many).

A student/parent takes out a loan in order to pay the remaining cost of attendance (after scholarships and grants). The federal government offers loans at a much lower interest rate than private lenders. The exact amount the federal government allows to each person and school is stated in the letter. This is the amount of money a student can request for a loan. Financial aid letters cover three types of loans:

  • Subsidized loan — this type of loan does not gather interest while a student is in school.
  • Unsubsidized loan — this type of loan does accrue interest.
  • Parent PLUS — a loan for parents that is also regulated by the federal government. Interest rates are higher for these loans, and parents are ultimately the ones who are legally bound to the loan.

If this is not enough to cover all the expenses, you may have to take out a private loan. Interest rates are higher, and they almost always involve a cosigner, who must demonstrate a near pristine credit history.

Student Loans

Work-Study Programs

Some institutions have robust work-study programs that allow students to work on campus, while they are in school. The money they receive is not always applied to tuition or funds, though some schools do offer the option to deposit the money into student accounts.

Read Carefully

Not all letters are created equally. The information is all there, but they are not always structured the same. This can make comparisons difficult. Set up a table that lists the direct costs and COA for each school. Under each of those numbers, write the gifts and aids that bring down the price. Once you have your net price, and you have checked your loan amount, you will be able to see more clearly which schools are more expensive.

Pay Close Attention to Deadlines

Be mindful that letters come with deadlines for responses. You can say “no” to parts of the letter. To clarify, you might notice that you have qualified for federal work study, but you know this is impossible with your schedule. You can say “no” to this part of the letter. You might also see that your loan amount is more than you need to borrow. You can adjust this by contacting financial aid at your school and correcting the amount.

What Is a Financial Aid Gap?

The financial aid gap occurs when awards and financial aid do not match your needs. Many middle to lower class students fall into this category, where they are left with an amount that cannot be paid. Of course, this is not true for all institutions as some do pay 100% of financial aid to those who truly need it.

To learn more about financial aid, you can check out the FAFSA website.

Have a question for us? Browse the WPU directory to find the department or person you wish to contact, or reach out to our financial aid team for all information. Learn more about WPU costs, scholarships, and financial aid here.