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week's question from
Mary S. from Boston, MA
I just got my financial aid package and don’t know what to make of it. What are some terms I should know, things I should look for, or tips and tricks to maximize my aid?
A complete, honest and comprehensive application is invaluable
Director of Student Services & University Advisor
It is critical that the student and parents provide a complete, honest and comprehensive report on the family's financial circumstances. It is remarkable the number of students who submit their applications for financial aid with critical pieces of information missing. For example, parental financial support for immediate and extended family members, siblings and grandparents most commonly, is sometimes omitted or downplayed and the resulting financial offer to the student of a lesser value than would otherwise be the case. Take the necessary time to review all demands on family resources so your college of choice has an accurate picture of your need. When an offer arrives review it. If you have omitted some significant items, or if financial circumstances have changed since your original application, then provide that information to the college immediately and request reconsideration. You might be very pleasantly surprised by the response.
Accepted to college!!! Now, let’s help you afford to go
Submit your 2010 tax info NOW for the best offers!!! Financial aid packages differ. Make a chart by college of 1) grants and scholarships (free money), 2) loans, 3) family contribution, and 4) your contribution via work. Which colleges give you the most money you don’t have to ever pay back? Private colleges that cost $20K more than public colleges often provide better packages. Explain to your family that loans are tax deductible, low-interest, and safe. Ask colleges if they can match the offers of other colleges. Choose the best college you graduate from with the least amount of debt.
All financial aid packages are not equal. Persistance pays off
The most affordable college may not be the best school for you. You should make a worksheet with columns and fill in the details from each financial aid package you receive. Consider the cost of attendance and which colleges offer the most federal grants and school scholarships. This is preferable to receiving college loans which need to be repaid. Also check the interest rates for any loans and the repayment policies. If you receive less financial aid from a school you really want to attend, contact them and ask whether they can match an offer from another college.
Apples, Oranges and Financial Aid Packages
There is no universal format for how colleges deliver financial aid packages to families, so compare packages appropriately. For example, when colleges describe cost, does they describe direct costs (only tuition & fees, room & board), or comprehensive costs (direct costs plus indirect costs, like travel, books, pizza, hair, laundry, etc.). Always look for (or calculate) comprehensive cost to understand things fully. Also pay attention to the composition of the package: how much is gift (scholarship and grants) and how much is self-help (loan and work)? Subtract gift from comprehensive to see what your true cost will be.
Ask the Tough Question, Can I Honestly Afford This College?
Stop looking for tips and tricks! Ask yourself a difficult question: Can I honestly afford this college? Make sure you really understand the details of the package you've been offered. Most financial aid offices are happy to explain their offers. Think carefully: Will you have money for food, books, and travel? If you can barely cover the cost now, what will happen when tuition goes up and your one-time scholarships are gone? What will your monthly student loan payment be on graduation? Don't financially overcommit yourself now - make sure you can actually afford your dream college.
Award packages are often different for a reason
As you review financial aid award letters, it’s important to take into consideration the cost of each school. Sometimes a student will say that he was offered “more money” from another school and asks us to consider raising the amount of our scholarship. In many cases the reason for the larger scholarship amount is because that school costs more money. So take a moment and subtract aid offered by each school from their cost – including tuition, room, board, as well as estimates for books, supplies, transportation, etc. This will give you a better understanding of what you’re expected to pay.
Be Aware that Not All COA’s are Created Equal
Don’t be alarmed if the financial aid letter you received is about as understandable as a Chinese roadmap. Here’s a tip: start with cost. Most awards provide what’s called total Cost of Attendance (COA). Make sure the figure contains ALL costs including books, travel, and basic living expenses—like an occasional night on the town. If you’re looking at schools involving serious travel, do a little independent research on how much it would cost to come home for holidays, your birthday or mandatory breaks and substitute that for whatever estimate the college provides. And be sure book costs are realistic. Once you’ve added it all up and arrived at a true COA for each of your options, you’ll be better equipped to compare awards.
Be sure you're making a fair comparison
One of the problems with trying to compare financial aid awards is that there is no standard format. Sometimes awards appear to be bigger than they are, because of how the school calculates cost. Some schools will show "direct cost" as the total, which is tuition plus room and board only. Other schools use the term "Cost of Attendance" or "Total Cost". This will include estimates for books, travel, living expenses, etc., which is the true cost of enrolling. What you need to focus on when comparing awards is either recalculating all your colleges to direct cost or cost of attendance, so you can truly compare apples with apples.
Be sure you’re comparing apples to apples!
Analyze the award letters carefully, and figure out how much is being offered in grants and scholarships (the money that won’t need to be paid back) and how much represents loans. Don’t count the work-study in your calculations. Know what the total cost of attendance is at each school (not just tuition); also determine whether grants and scholarships are renewable for four years, or only offered to freshmen. Call the financial aid office if the terms of the offer are unclear, and then focus on the bottom line: how much will each college cost you and your parents out-of-pocket?
Comparing financial aid is complicated but important to do properly
Each school costs a different amount, and those amounts includes different expenses. EWith school provides its own version of an award letter, so it's not fundamentally easy to compare them, apples-to-apples. Some schools offer merit aid, some need-based aid, some both. Some schools offer loans, while others do not package loans. Work-study awards can mean different things at different institutions. It's best to try to figure out what your out-of-pocket cost will be at each school in order to try to compare packages. This can be a laborious exercise, but is essential to understanding your real cost of attendance at any college or university. Don't be afraid to call a school's financial aid office to ask questions!
Dare to compare, examine the offer and request clarification, if needed
Students and families must be pro-active consumers when it comes to comparing financial aid packages. Read the fine print. More than once I’ve had the unpleasant task of interpreting an offer letter where a family had mistakenly believed that a $30,000 scholarship aid package meant $30,000 taken off the total cost of attendance. Upon further investigation, we recognized that the aid came in the form of $25,000 worth of loans and a $5,000 grant. Loans are okay but there are really just deferring payment down the road and will likely saddle a young graduate with too much debt. Grants are good! Grants are free money with no required pay-back. Also, be sure to confirm that the same amount of aid will be offered each year and what conditions, if any (minimum grade point average) are required to maintain the aid.
Decoding financial aid is an important step in establishing your cost
There are three types of financial aid: money that you don’t have to repay, money that you do have to repay, and money that you earn. The money you will not have to repay is typically called a scholarship or grant. The money you will have to repay comes in the forms of loans.(Note that there are many types of loans, some with interest that begins accruing immediately, and others with interest that does not begin accruing until you leave college. Some loans are available through the college you will attend, others you will have to obtain privately). Finally, money that you earn typically comes to you through the college with a job offered on campus. In the case of work, be sure you understand the pay rate applicable to the work because this divided into the amount of the work funding you receive will determine the number of hours you will work a week. Typically 10-15 hours of work a week are within reason for a resident college student.
Evaluate the Net Cost of Attending College
Financial Aid awards are based on your EFC (Expected Financial Contribution). It is imperative that you evaluate your financial aid packages from the various schools. It is important to prepare a chart to evaluate the Net Cost of the schools you are considering. Take the school’s Cost of Attendance and subtract free money, including Scholarship/Grants and Need-Based Aid. You will then arrive at your Net Cost which you can compare with the Net Cost of the other schools you are considering. Then you can take into account the parent’s and student’s loans which must be paid back. Remember, you may appeal the decision if you clearly explain your circumstances such as unusual medical bills.
Evaluating Your Financial Aid Offers
The only true financial aid involves grants and scholarships from the institution, though universities generally will list federal loans, subsidized or unsubsidized, and work-study programs as part of the aid package. Break down each offer into the three areas listed above (grants, loans, and work study) so you will know exactly what you are being offered. Do you want to have the least amount of out of pocket expenses, even though you will spend time in a work program and have loans to pay back when you finish school, or is it more important to you to accept the offer with the greatest amount of grants and scholarships that do not need to be paid back? Your decision becomes a matter of personal choice.
If your offer is less than expected, pursue other funds!
A resource that I like to recommend is www.finaid.org. It has a glossary that is very "user-friendly" to a novice. Be careful not to fall prey to scams, as many con artists know that college students and families can be desperate for any type of financial support. If you decide to consider loan institutions, select those that are reputable and, if necessary, consult the BBB. Don't be modest about researching scholarships. Many Naviance Family Connection school programs have a scholarship list and scholarship match component with good resources. There's nothing wrong with being assertive and asking the institution about merit and need-based aid, as well as unidentified funds. I've had many former students assume this advocacy role and get rewarded with support.
Look at free money first; Don’t be afraid to negotiate
Look at free money first—scholarships, grants and merit aid. Then, work-study—job placement on campus or in the local community. And finally, loans—money plus interest paid back over time. Once you’re admitted, a college wants you to attend. Have your parents call the financial aid office. Present the most comprehensive picture of your family’s financial situation, including any changes. Ask a first-choice school to match another offer. Students often receive more aid. Awards may not be consistent for four years—you’ll need to reapply annually. Choose a college that’s an academic, social and financial fit for you.
Many colleges have discretionary dollars to help students
Once you receive your financial aid award, it is entirely acceptable to contact the college financial aid office and ask if additional assistance is available. Many colleges have discretionary dollars to help students with the cost of attendance. It is also fine to indicate that the college is your top choice and that additional aid will make it possible for you to enroll. However, do not play auctioneer with a financial aid office, saying that, “Big Time University gave me $12,000 but your college gave me $8500.” Be thankful for the initial award and gracious in your request.
Mind the Gap!!
One of the biggest mistakes that many college bound families make is to focus solely on the grand total of the award, without carefully considering its individual components. “They gave me the most money,” say many students when asked why they chose a particular institution. But viewing your financial aid package in this way can be deceiving. Instead, think about long-range affordability. Start with the cost of attendance: tuition, room and board, and expenses. Then deduct out any grants, scholarships or work-study awarded – this is gift aid that you don’t have to pay back. The resulting number is what you should really consider your “award.” Finally, calculate the gap between this “award” amount and the amount that your family realistically can afford. Some schools will offer you loans and others will “gap” you (not meet 100% of your EFC). Regardless, you want to mind the gap and keep that number as small as possible, both for your family’s current financial stability, as well as your future debt load.
Not all aid is the same, and how long you’ll need to graduate is important
Avoid thinking about “maximizing aid” and instead of “minimizing costs,” because not all aid is created equal. You may know that some aid is gift aid, which is naturally preferable to loans or work. Sometimes grant aid from universities comes with strings attached, like minimum GPA for renewal (or no renewal), or enrollment in a specific major. Most important, figure out how long it takes the average student at each college to graduate. Divide four-year graduation rate by six-year graduation rate. The higher the number, the greater the chance you’ll graduate in four years, which not only saves you tuition dollars, but also gets you earning your first post-college paycheck faster.
Not all Financial Aid Packages Are Created Equal
When families see a big number on their financial aid package, they get excited. However, the make-up of the aid package is more important than the actual number because it lets you know your true out-of-pocket cost. Identify the Gift Aid (scholarships, grants) listed on your package, then subtract it from the Total Cost (tuition, room, board, etc.). What you get is the Family Cost, a much truer way to compare your aid packages. (Although financial aid awards usually include loans, you will have to pay these back, so they ultimately become part of the Family Cost.)
Observe the total cost, not just line item amounts
Be sure to compare the bottom line cost, not only the amount of scholarship money received. Know what expenses will be billed such as tuition, fees, room/board vs. personal expenses paid for out-of-pocket throughout the year. Depending on school location, personal expenses can vary greatly - and should include travel cost. Also, understand what is gift money (grants/scholarships) vs loans, which you'll have to repay. With scholarships, know if they're renewable and what the requirements are to renew them. Finally, know that not all schools negotiate. Many publics do not, which means aid is not flexible unless income changes.
Paying for College May Be the Most Stressful Part
It is important for your family to determine what you can reasonably afford and make sure you are exploring colleges that fit within those financial parameters. Doing well academically (SAT, ACT and in classes) and being active pre-college will go a very long way toward maximizing your financial aid package. To understand whether you’re getting the best deal, do a side-by-side comparison to see how much each school is offering and what your net cost (what you have to pay in the end) will be. This usually means subtracting the scholarships and grants from the total cost of attendance. If your package is not meeting family expectations, get creative by patching together dollars to make the financial ends meet. You can reach out to local community organizations, honor societies and even search for quirky scholarships around a hobby or special interest. Also connect with current college students at the school you want to attend, because they usually have the best advice based on their experience and what they wish they would have known before they arrived. Never eliminate the dream of education because of lack of financial resources but make sure you don’t get too deep in debt that it will create stress and inhibit your ability to be successful after you graduate.
Put aside rose-colored glasses and remember: loans must be repaid!
Congratulations - if you’re reviewing financial aid awards you’ve been admitted to college and hopefully one that excites you. But now it’s time to look through clear lenses at what the awards actually tell you. Look at each college’s billed costs including all fees, then subtract the total amount of grants, scholarships and federal work-study offered. The net figure remaining is what you and your parents will have to cover through family contributions and loans. A word of advice: be conservative in taking out loans, despite colleges offering PLUS (parent) loans by the cartload. Make sure that you and your family will be able to pay off debt incurred without mortgaging your collective future. And if you’ve received more generous offers from other colleges, it can’t hurt to ask a financial aid office politely whether your award can be reviewed and adjusted.
Start with the COA – Cost of Attendance
When comparing financial aid awards it’s important to keep in mind that the COA will vary from one college to the next. The COA is not only the tuition, fees, room & board, but also books & supplies, transportation and personal expenses. Subtracting the financial aid award from the COA will determine the contribution required of the family. It’s also important to compare the total gift aid (scholarships and grants) and the self-help portion (loans, college/work-study). Managing the overall student debt is important and generally $25,000 over four years is a benchmark. Stafford and Perkins Loans are preferred over private loans. Families with financial circumstances not reflected in the EFC (Estimated Family Contribution) calculation should contact the colleges Financial Aid Offices to offer clarification and seek possible adjustments to the awards. Colleges want to make it financially feasible for their admitted students to attend.
Take control and be at an advantage
You're not alone. The reason most students (and parents) find the financial aid process complex is because it is complex! But don't let that stop you from investing the time in better understanding the process and the terminology you'll find in financial aid awards. You have two great resources at hand. First, the College Board Website has a free and easy to use on-line tool that allows you to compare financial aid awards and demystifies the challenging terminology. Second, there are the financial aid officers at the colleges you are considering, and you shouldn't hesitate to call them with your questions. Take control of the financial aid process, and you'll find yourself at a clear advantage for your entire college career.
The aid award challenge: Comparing apples to apples
First – no need to figure this out alone – the college’s financial aid and admission officers should be more than willing to walk through your award and explain it to you. Call or email and ask. Second, make sure you understand the cost of tuition, fees, room and board and other items your aid was based on. Third, remember financial aid is of two types: gift assistance (scholarship and grants), money you don’t have to work for or pay back (a “gift”) and self-help – work-study and loans – money which you either earn at an on-campus job or borrow.
Tips for understanding the financial aid package
The most important piece of information in your financial aid package is the EFC (Estimated Family Contribution). This is the figure used to qualify you for funds, but unfortunately, may not provide a realistic expectation of what a family can contribute to the college education. It is important to look at your net cost of attendance (out of pocket) by adding all of the aid offered and subtracting that from the total cost of attendance. This step is particularly important if you are still comparing colleges. Be sure to contact your Financial Aid Office if financial circumstances have changed significantly in the past year.
Use this formula to make sure you don't miss anything!
Each college should provide to you the annual cost of education. This will include “billable expenses” i.e. tuition, room, board and fees and indirect costs such as books, supplies, travel, and personal expenses. Your aid award should list grants and/or scholarships which do not need to be repaid. You will need to subtract your grants/scholarships from the “billable expenses” to determine what your family will be expected to pay to the college. Compare this amount to other awards from like colleges. The goal is to determine what college fits into your academic aspirations and your family's financial goals. Your award may also include student loans and an offer of student employment. Those loan proceeds can be applied to the bill, but they will have to be paid back sometime in the future.
Use this tool to demystify financial aid
Terms on Financial-Aid Package Letters are like an alphabet soup: GSL, FWS, PLUS, EFC, etc. Where should you begin to learn the fine points of understanding the many terms listed in a Financial Award Letter, and, more importantly how can families compare awards from different colleges? Simple. Just go online to www.FinAid.org to find the answers to any possible question you might have. In addition to a glossary of terms, there is a section for parents and students to help them in evaluating an award letter. There is also a sample award letter comparison tool. This site makes the complicated simple!
What is the “cost of attendance” at your chosen college?
Some colleges fail to include the most important piece of information on their financial aid offers. That is, the cost of attendance. It’s impossible to compare financial aid offers without knowing the cost of attendance, which includes tuition, fees, books, room, board and personal expenses. If that’s the case with any of your financial aid offers, call the college’s financial aid office to verify what it will cost to attend the college for the upcoming academic year. Once you have the cost of attendance, it’s possible to make an “apples to apples” comparison of financial aid offers from various colleges.
Work study could be great - but don't sell yourself short
When one receives a financial aid award, it is important to look at each line item carefully. In general terms a scholarship or grant is money that does not need to be paid back. However, it is important to note whether the award is renewable each year. Any award with the word loan in it is money that will need to be paid back, including interest. A work-study program means that the student will be working at the college in order to receive the award. If considering a work-study award, it is sometimes more advantageous to seek regular employment (if the student has work experience, stellar references, and the college is located in an area that has vast employment opportunities) and may be able to earn more on their own vs. the work-study award.