You’ve filled out the Free Application for Federal Student Aid (FAFSA), submitted your college applications, and have received your acceptance letters, so what comes next? Welcome to the confusing task of reviewing and understanding your financial aid award letter! If you’ve received your letter and are wondering what COA, EFC, Subsidized, and Unsubsidized mean, never fear, we are here to help!
First, it’s important to know how your college calculated your award package. When you completed the FAFSA, this information was sent to your prospective colleges and you were assigned an Expected Family Contribution (EFC). Colleges use this number, along with the Cost of Attendance (COA), to determine the amount of financial aid you may be entitled to receive. Each college has different variables when determining their COA, with many including tuition, fees, books and housing in the calculation.
After the college determines the total amount of financial aid you may receive (COA – EFC = Financial Aid), it then provides an offer which may include a variety of options, such as:
Grants: Grants are ‘free money’ that is awarded based on financial need. You may be offered a Pell Grant (valued up to $5,500 per year), and/or institutional grants (vary in size) to help cover some (or all) of the costs to attend.
Scholarships: Colleges may offer you both merit-based (grades) and need-based (income) scholarships, depending on your grade point average (GPA), test scores, and college financial aid application. You can also receive scholarships based on your high school class ranking (Valedictorian, top 10%, etc.), athletic ability, intended college major, and other factors. All of these are considered ‘free money’ and do not have to be paid back.
Work-Study: Depending on your EFC, you may also be offered work-study opportunities at your college campus. This is money paid by the government. Typically, you will be paid minimum wage or slightly higher and work between 10-15 hours a week. The hours are flexible and you can work around your class schedule. Any wages received through this program do not have to be paid back.
Perkins Loan: This loan is offered to students based on financial need and carries a 5% interest rate, which does not accrue until after the grace period, but may accrue earlier if the student leaves school or drops below a part-time status. The total amount available is $5,500 per year with a $27,500 undergraduate maximum. Any amount borrowed must be paid back.
Direct Stafford Subsidized Loan: Depending on your EFC, you may qualify to receive a federal Subsidized Loan. The amounts vary depending upon your status (dependent/independent) and year in school, but range from $3,500 to $8,500. The interest rate is currently 3.4% and does not accrue while the student is in school. A 1% fee is deducted from the loan amount prior to disbursement. Any amount borrowed must be paid back.
Direct Stafford Unsubsidized Loan: Unlike the Subsidized Loan, Unsubsidized Loans are not based upon financial need. Students may receive between $5,500 and $20,500 (depending on status and year in school) annually, and interest (6.8%) begins to accrue upon disbursement of the loan. There is also a 1% fee deducted prior to disbursement. Any amount borrowed must be paid back.
Although your financial aid award letter may include grants, scholarships, and loans (some colleges also include private loan offers), be sure to review all offers and the terms prior to accepting any part of the package. You are not required to accept any portion of the award package and are encouraged not to take out more loan money than you really need. To learn more about federal student loans and their conditions, be sure to visit the Federal Student Aid website. If you find you still have questions about your award offer, be sure to contact your school’s financial aid office for assistance.
Do you have offers from more than one school? Use this award letter worksheet from American Student Assistance (ASA) to help determine which offer is best for you!
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