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How to Decode Your College Financial Aid Offer

Donna Rosato

You just got accepted into college. Now it's time for you—and often your family—to figure how to pay for it. That means wading through college offers of financial aid, which usually arrive the same time as the acceptance letters.

Most people request financial aid by filing the Free Application for Federal Student Aid (FAFSA), which determines your eligibility.

The financial aid offer, which the college sends by regular mail or email, outlines the cost of one year’s attendance as well as any grants, scholarships, loans, or work-study programs that you qualify for. It also details how much the college expects you to pay, including any loans you take out.  

Most schools give you till May 1 to decide whether you’ll attend. That gives you time to compare the different aid offers from each college and decide which one is the best financial fit.

You may need the extra time. Financial aid letters can be confusing, partly because there are no standard forms or terms that describe the assistance.

The U.S. Department of Education has developed a Financial Aid Shopping Sheet, a standardized award letter that it wants schools to use to make it easier to compare aid packages. But using the form is voluntary and only about half of schools do so.

“How much you’re going to pay for school is one of the most important aspects of deciding where to go to college,” says Justin Draeger, president of the National Association of Student Financial Aid Administrators. “Now families and students can have more time to determine what school makes the most sense for them.”

Here are some quidelines to help you get through the financial aid process.   

Figure out your total expense. Look at the "total cost of attendance" number the school lists, then subtract grants and scholarships (that’s the “gift” aid that you don’t have to pay back) to figure the net cost. Be sure to include all your likely expenses. Some schools report total cost as tuition, fees, room and board. Others include books, transportation, school activity fees and living expenses. You’ll want to factor all those costs in if the school doesn't. Remember that you may need to budget even more for some expenses, like plane tickets if you go to school far from home. 

Don't hesitate to ask for more aid. If you don't believe the financial aid package meets your needs, try to appeal it with the school's financial aid office. If you received a better offer from a comparable school, use that to negotiate a more favorable award. Or if you had a change in circumstances since you applied, such as a parent's job loss, a divorce, or a big medical expense, contact the school to ask that they review your family finances.

Think beyond one year's expense. The financial aid offer you get from the school covers one year, but you should think about how much aid you'll need for your entire education. Some schools award more grant money upfront to entice you to enroll, then reduce the amount in later years. Ask which scholarships and grants are renewable and what the requirements are to qualify each year. You may need to maintain a certain grade point average, for example. Even if the size of the grant and scholarship you get stays the same, keep in mind that the tuition will most likely rise.

Be smart about borrowing. You may be tempted to take out lower-rate private loans over federal loans. But a private loan is likely to have a variable interest rate that could rise over time, costing you more. Federal loans have fixed rates and come with more consumer protections. They also offer flexible payment plans, which private loans don't. 

Once you understand the information in your offer letter, you can use this tool from the Consumer Financial Protection Bureau to compare school costs.

If you haven't filled out a FAFSA yet, it's not too late. You can apply for federal financial aid through the end of the academic year you are in school (so, that's June of 2018 for people going to school this fall). But the sooner, the better.

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