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How to Read Your Financial Aid Award Letter

Notoriously complicated and confusing, financial aid award letters are now arriving in students' mailboxes. To read them, students should take advantage of available tools, create a spreadsheet to properly compare offers and contact their financial aid office if something doesn't make sense.

Students hoping to get help paying for college should expect to receive their financial aid award letter after submitting the Free Application for Federal Student Aid, or FAFSA, and meeting other institutional requirements. This typically occurs around the time applicants receive college admissions decisions but could be as early as October to as late as April, experts say.

Financial aid award letters are created by each individual institution to provide information on the cost of attendance at the college for an academic year and to detail any grants, scholarships, work-study opportunities and loans the student is eligible to receive. The exact timing of when the letters are sent -- and whether by mail, email or both -- varies across institutions.

So, too, can the language used in these letters. A 2018 report by nonprofits New America and uAspire titled " Decoding the Cost of College" found that financial aid award letters from 455 colleges used 136 unique terms to describe the same federal unsubsidized student loan. These terms include "Direct Unsubsidized Loan 1," "Direct Unsub" and "Unsubsidized Stafford Loan DL." Notably, 24 of these terms did not use the word "loan."

This jargon, the report authors argue, causes confusion for students and families and makes it difficult to make the best financial decisions when choosing a college.

"No federal policy exists that requires standardized terminology, consistent formatting, or critical information on every financial aid award letter," the report reads. "Poor communication of financial aid options can threaten the student's (and sometimes her parent's) long-term financial health by obscuring the basic terms and conditions of aid. Financial decisions based on incomplete and incoherent information place students at risk of facing unanticipated costs."

There are a few steps students can take to mitigate these challenges and accurately read their financial aid award letter.

Steps to Reading a Financial Aid Award Letter

Each college may have its own unique financial aid award letter. To read it, students should start by making a note of terminology they don't understand or have questions about.

[Read: Key Words Used in Financial Aid Award Letters.]

To help make sense of the letter, students can take advantage of the U.S. Department of Education's College Financing Plan, which provides a sample financial aid award letter with annotated explanations to guide students.

( U.S. Department of Education)

Some students find it useful to create a spreadsheet of award amounts and information from each college they're considering. But they should be cautious, Rachel Fishman, deputy director for research in New America's higher education initiative, warns.

"When you make a spreadsheet, try to make apples-to-apples comparisons. This can get tricky because even the cost information, if it's included, might be incomplete," Fishman says.

"If the cost information is not included, what the student should do is look up the full cost of attendance at the college that they have the offer from. It's important to get the full cost of attendance information because that's going to have the direct costs, like room and board, but it's also going to have an estimation that the college made about the indirect expenses such as books and supplies, transportation and personal miscellaneous expenses that are important to be successful as a student," she says.

Accurately comparing and understanding financial aid offers will require some research. It's important for students to know how a particular college defines certain terms, like net price, which is defined by the Department of Education as the cost of college after gift aid is applied -- even though some colleges define it as the cost of college after all aid, including student loans, is applied. Fishman suggests students separate grants and scholarships from all other kinds of aid and understand the terms and conditions of money that doesn't have to be repaid -- including whether it's renewable.

"If you have a grant or scholarship from an institution and it doesn't say why you got the grant and whether it's going to continue next year, if your decision to attend that school hinges on the fact that you got a $20,000 scholarship, you definitely need to call up the institution and say, 'Hey, am I going to get this next year?'" she says.

Students should fully understand the aid they are accepting, Fishman says, especially if it is not a grant or scholarship. Multiple types of loans may be included in an award letter, including federal student loans that are either subsidized or unsubsidized and federal loans borrowed by a student's parent. Students may also consider private loans, which must usually be co-signed by a parent and offer fewer consumer protections, Fishman says.

[See: 10 Advantages of Federal Student Loans.]

Students who are still confused by their letter might consider taking advantage of tools created by independent companies, such as the Offer Letter Decoder created by The Hechinger Report, a nonprofit news website. The tool allows students to upload a financial aid award letter and generates clearer information about its contents and meaning.

Further complicating matters, some of the award amounts included in these letters are only estimates. During any economic downturn, such as the one caused by the novel coronavirus outbreak, stated amounts may change.

"Institutions are going to do the best they can to estimate what will be available, but if budgets are being slashed in real time, that might be one area of uncertainty," says Megan Coval, vice president of policy and federal relations at the National Association of Student Financial Aid Administrators.

"Especially during this time of uncertainty, I always encourage reaching out to the financial aid office if there are questions about the financial aid award notification, and if there are concerns about your family situation changing or you are concerned about if something you were awarded will really be available in the fall," she says.

Students may also find that the amount of aid they were awarded does not cover their need, resulting in a gap. The New America study found that among students who received Pell Grants, a type of federal aid for low-income students that does not need to be repaid, their financial aid awards left a gap of unmet need amounting to nearly $12,000, on average.

When to Expect a Financial Aid Award Letter

Many colleges are moving up their entire financial aid timeline to match a recent federal change that allows families to access and submit the FAFSA three months earlier than in prior years. This could allow students to receive their financial aid packages sooner.

As of the 2017-2018 school year, the FAFSA is available on Oct. 1 each year rather than Jan. 1 for families applying for federal financial aid. While the full impact of this shift is still unknown, some schools have been adapting accordingly, says Marty Somero, director of financial aid at the University of Northern Colorado.

"The first year you saw schools scrambling and sticking to older timelines. But by and large I think at most public universities and definitely the vast, vast majority of privates, the timeline has moved up," he says. "In fact, I think you are now in a time frame not only for award letters but you'll start seeing orientations and registrations moved up earlier also to go hand in hand with that."

But the change has not prevented some process delays, says Mindy Schaffer, director of student financial assistance at The Catholic University of America in the District of Columbia, and the timeline still depends heavily on the institution a student is considering.

"Some schools are better than others with regards to getting the award out," Schaffer wrote in an email. "The Early FAFSA is great, but many institutions struggle since (the Department of Education) and their system vendor don't get the new regulation releases out until December through February."

Each year, the Department of Education announces any changes to the process for the coming cycle that affect how financial aid offices award aid to students.

After submitting the FAFSA, students should receive an email within a few days from the Department of Education containing the Student Aid Report, which provides their expected family contribution, or EFC, a number that measures their ability to pay for college. This report summarizes the entries made by a family, and Somero says it may also indicate whether a student is likely to be eligible for the Pell Grant.

[Read: How Expected Family Contribution for College is Calculated.]

If an email address was not provided on the FAFSA, the Student Aid Report will come by mail and can take longer to arrive.

But the Student Aid Report doesn't tell families how much financial aid they will receive, so some have to wait months for award letters from individual institutions to get a full picture. Colleges may allow students to access an online portal to see the status of their financial aid package in some cases. There, students can check to see what additional documents need to be submitted, if any, and to see their award letter when it is ready.

The timing of a financial aid award letter can depend on a number of factors, including the school a student selects and when he or she submits the FAFSA. Experts say students should submit the FAFSA as early as possible and note priority deadlines set by individual institutions to ensure they get the most aid possible and to hopefully receive their awards sooner.

Some institutions provide financial aid packages on a rolling basis, while others just use a rolling basis to send award letters to students who have missed the FAFSA priority deadline set by the school. Private colleges tend to send award letters sooner than public colleges, Somero says.

[See: 10 Common Mistakes Made on the FAFSA.]

"From private schools, they have a little more flexibility and they are generally using their own funds, so you can expect to see some turnaround as soon as the end of October or early November," he says. "Public schools where they are trying to be aggressive, typically you're looking at more likely between Thanksgiving and early in the new year."

Students who apply to a private school via early action admissions may be more likely to get preliminary award information and scholarship offers sooner, but at public institutions they aren't likely to get offers any sooner than those who apply regular decision, Somero says.

The timelines for financial aid at community colleges are often later than other institutions, he says, because students may be applying for aid and enrolling later in the year than undergraduates at four-year institutions.

Trying to fund your education? Get tips and more in the U.S. News Paying for College center.

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