Understanding Financial Aid
Packages
Seniors,
I may be a little early, but from my conversations with several
colleges, some have noted to me that they will start releasing award letters to
“accepted students” as early as January.
So in summary to date….
1.
You have applied to college
2.
You have done your FAFSA and your FFAA registration (PLEASE make
sure that there are no errors or issues with your Student Aid Report - SAR.
3.
You are now waiting to be accepted OR have already been accepted.
NOW
1.
You need to wait to receive your college “Financial Aid Award
Letter” (See some sample Award Letter below)
2.
Please read the short article below to understand how you should
evaluate the award letter that you receive and then make the final decision on
which college you will attend.
By:
Rachel Fishman is a policy analyst for the Education Policy Program at the
New America Foundation. (with some editing)
After
you’ve been accepted to a college and completed the financial aid application
(FAFSA) process, that college will send you a financial aid package.
So if you are accepted to three different colleges, and applied for financial
aid at all of them, you will receive three separate financial aid packages. The
question is, which one is best for you?
Each
package will look different. Most financial aid packages will detail the Cost
of Attendance for that college. After that they will detail how much
they will offer you in Scholarship $ (performance = grades/test
scores/athletics/ etc…) and Financial Aid $ (income/need based =
grants, loans and work-study).
Here
are some tips that will help you understand your financial aid awards:
Find
the Full Cost of Attendance for the School
The
Cost of Attendance will vary depending on your situation but usually contains tuition and fees, room and board, books and supplies, transportation, and personal expenses.
These are all budgetary estimates by the college of how much you will spend for
your time in college that academic year. Depending on your needs, there are
some cases where you may need more money and some cases where you may need
less.
Add
up All the Free Money (grants and scholarships)
Remember,
grants and scholarships are gift aid that you don’t have to pay back, so first
you’ll want to add that money up. For example, if you see the word Pell, then
that’s a federal grant that the government gives you that you won’t have to pay
back. If you are unsure whether something is a grant, scholarship or loan, call
the financial aid office.
Subtract
the Free Money from Your Cost of Attendance
Before
you even look at your loan options, make sure you do this step! This will give
you a rough idea of what you will need to pay for the academic year. You may
have loans to help you cover those upfront costs, but remember you’ll have to
pay back those loans eventually so it really is an expense.
HINT: Now is a good time
to review your Cost of Attendance and try to come up with your own budget. For
example, are you staying at home while going to college? If so, will you be in
charge of paying for your expenses at home? If not, you may not need to borrow
as much money.
Consider
All the Self-Help Aid (loans and work-study)
Self-help
aid includes loans and work-study. Loans will help pay for your tuition bill
right away, whereas with work-study you’ll have to work in specific jobs during
the school year to earn that money (learn more about different types of aid).
The federal loans available may include the Perkins loan, Federal Unsubsidized
Stafford, Federal Subsidized Stafford or Parent PLUS loans. Now that you have a
better idea of your budget and how much you may still need to pay, you should
be more aware of how much in loans you may need to take out.
IMPORTANT: The amount of loans on your financial aid award package
is the full amount you are eligible for. You do not need to take out these
loans in full. If you think you need less money, follow the directions on the
package to decline the full amount and indicate the lower amount you need
instead.
HINT: Not all federal
loans are created equal. Some have more flexible terms than others. It’s recommended that you exhaust
your loans in this order: Perkins, Stafford Subsidized, Stafford Unsubsidized.
Only as a last resort should you consider a private loan or a federal Parent
PLUS loan. These loans have less generous terms, and your parents will most
likely have to undergo a credit check to take one out. Be sure to read more
about federal loans at the Federal Student Aid’s website.
Understand
What You Will Owe
You
already know that you’ll have to pay back any loans. But make sure you
understand your budget and whether you are completely covered for the year.
Most colleges won’t be able to meet the full amount you need so be aware if you
need to seek out any other financing options.
IMPORTANT:
You and your family can seek other financing options like private loans and
Parent PLUS loans. Call your financial aid office for more details. Just
remember, you will have to pay back those loans, so make sure you are
comfortable taking on that debt.
Remember,
if you have any questions about your financial aid or if your financial
situation has changed, it’s important to talk to someone in the financial aid
office. The Consumer Financial Protection Bureau also has a financial aid award
comparison tool available on its website here.
