As college admission letters begin to roll in, financial aid award letters will follow shortly. These letters are the result of the completion of the Free Application for Federal Student Aid or FAFSA that families with seniors who will continue their education after high school should complete after October 1st of senior year.
Financial aid award letters will only come from schools that a student has been accepted to and their structure can vary a bit from one school to the next. However, there are usually some basic elements you’ll always find. The first of these is a snapshot of the cost of attendance at a given school. Of course, this number will include tuition but it will also include things like living expenses and meals. It should basically be the amount of money the school projects it will cost to attend school and live for a year.
From here, you’ll hope to see items on the letter that will reduce this number. One of those potential items are institutional scholarships. Institutional scholarships are those awarded directly from the college. These are usually merit-based and they often have automatic qualifications (i.e. students with a given high school GPA and/or test score automatically get this amount.). If a student is an athlete and is being awarded an athletic scholarship, they’ll find this on the letter as well.
Next, you’ll find monies that might be awarded from government programs. This could be merit-based scholarships that are awarded by some states for students who meet certain qualifications in high school. Some students might also find government grants like the Federal Pell Grant which are need-based.
Some students will be offered money through Federal Work Study programs. This is a guaranteed job on campus with earnings designated to go towards expenses at the college.
Finally, many students will find an offer for student loans on their award letter. This could be a collection of a handful of different types of loans–most notably, subsidized loans that do not accrue interest while a student is in school and unsubsidized loans that do.
Now, the letter will add all of these sources of money together and subtract them from the established cost of attendance. It is possible for a student to be awarded more money than it costs to attend a school. In this scenario, a student can actually profit from attending school. Other students might find a balance of zero. The cost of their college is fully covered. Finally, many students will find a positive number.
If there are remaining expenses, they are expected to be paid out of pocket by the student and their family. This number can be scary, but there are a few things to remember. The student might have other funds earmarked for college that don’t appear on the award letter. If the student is awarded a local scholarship by some organization in their community, it’s probably not included on the letter. Neither are savings from vehicles like 529 plans or state-sponsored prepaid plans. Some students are fortunate to have parents or grandparents who have simply set aside a pool of money for their college education. All of these can be impactful in reducing those out-of-pocket expenses.
If out-of-pocket expenses are not something a family can cover they may seek additional loans through banks and colleges can help connect families and lenders. Just be wary that other loans may already be a part of what is being awarded to a student.
