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Anatomy of a Financial Aid Award Letter

Jun 20, 2014 Jennifer Williamson, Distance Columnist | 0 Comments

When you apply for financial aid, colleges will give you your results in the form of a letter. This letter is supposed to present the details of your financial aid in a clear, easy-to-understand way, but many financial aid letters fall short.

The downside is that every college’s financial aid award letter is different. However, there are a few things to look out for that generally mean the same thing across all colleges, and there are also a few things to keep in mind no matter whether you’re getting your degree at a traditional private school, a public school, or an accredited online college

Your financial aid “package"

Your school will likely refer to your aid as a “package.” This basically means that you’ll have aid coming from several different places, including scholarships (if you’re lucky), federal student aid, and private aid.

Cost of Attendance, or COA

Cost of Attendance is the full amount of tuition. For many students, there is a significant gap between COA and what’s covered by scholarships and federal aid. This is where private student loans come in.

Some colleges don’t list the full cost of attendance in their financial aid letters. Others include a partial cost of attendance that does not include room and board, books and supplies, personal expenses, and other costs. In addition, while some colleges will break down all the components of your COA, others will just provide a single figure. Be sure to ask your financial aid officer if the COA on your award letter is not clear.

Some colleges try to make it difficult to tell how much of a gap there is between the real COA and your financial aid. They do this by obscuring the COA number itself, by presenting non-need-based federal and private loans as “Aid,” and trying to obscure which components of your financial aid package are grants, scholarships, and federal or private loans.

Expected Family Contribution, or EFC

Just like the name suggests, this is the amount you or your parents are expected to kick in toward your education. This number is supposed to be “affordable” based on the school and federal government’s assessment of your family income, but for many students and their families, it’s not an easy amount. Parents often have to take out loans or mortgage their homes to pay their EFC.

Federal financial aid

Federal aid is given out based on financial need. The students with the most financial need get Pell Grants (which are not loans and do not have to be repaid) and Perkins loans, which have the lowest interest rates. Other types of loans include various types of subsidized loans, in which your interest does not accumulate while you’re in school; and unsubsidized loans, in which it does accumulate.

Some federal aid is not need-based and is available to anyone regardless of financial need; because of this, these loans are generally unsubsidized and have the highest interest rates. These include unsubsidized Stafford loans and the PLUS loan, which is available to graduate and professional students as well as parents of students. These are sometimes presented in financial aid award letters as “Aid,” generally to try and obscure the gap between real financial aid and the cost of college.

Private financial aid

Loans from private lenders are neither scholarships nor grants nor merit-based or need-based in any way. They are usually included to help students and parents cover the gap between federal aid and scholarships and the COA. Some colleges will list private financial aid on the award letter, but even if they do not, you will be able to get a private loan.

Some colleges list specific lenders on the award letter as “preferred lenders.” Be aware that you do not have to choose the lenders or loans listed on a financial award letter; you can shop for education loans anywhere, and this is often advisable in order to get the best deal.


The federal work-study program will allow you to make up some of your financial aid through a part-time or full-time job; this is usually based on financial need. The program is usually administered by the school, and includes campus jobs as well as off-campus positions. Generally, your work-study job should be relevant to your field of study.

Financial aid award letters are not always the clearest—and sometimes that’s deliberate. Some traditional and accredited online colleges will try to make loans look like grants, disguise the gap between your cost of attendance and your financial aid, and provide more grant aid to Freshmen—don’t be surprised if your financial aid award includes more loans as you make your way through school. If anything isn’t clear in your financial aid award letter, sit down with a financial aid representative and get your questions answered. The decisions you make now regarding your financial aid will affect your life for years to come.



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