Understanding your Financial Aid Notification

Sorting through financial aid options can be a bit much. That's because a college degree is a big expense. It’s important that you feel comfortable and confident breaking down the information colleges will send you related to your student’s financial aid package. To help, we've put together this definitive guide to everything you need to know to read, compare and decide on the right financial aid package for you. 

Okay, maybe it’s not definitive, but it’s pretty close. Keep reading.

Every school has a financial aid team and they work really hard to make sure students have access to the optimal financial aid solutions for their situation. Given the various ways universities work with families and students to help them fund a college education, it’s no surprise that while financial aid offices are doing their best to be helpful, the award notifications they send out can still be confusing. Because there is no standard format for financial aid notification letters that all universities use, the best thing you can do is make sure you understand the language they’re using, and how they’re calculating the costs. 

Terms to know

Cost of attendance = The estimated total cost of attending a university. COA includes tuition, room and board, books, transportation, and other costs that students typically need to consider when leaving home for college. 

Tuition and fees = The “sticker price” of attending a university. It will typically include the cost of classes broken down by semester or year for a minimum number of credit hours (usually 12). 

Financial aid = Money that is either gifted or lent to students and their families in order to pay for their education.

Net price = The annual cost of attendance  minus any gift aid, tuition waivers or scholarships. The net price does not take into account loans or student employment. 

Gift aid = Money that is given to your student and doesn’t have to be paid back.

Grants = Need-based aid that doesn’t need to be paid back.

Scholarships = Money given to your student based on need, academic accomplishments or other factors. Scholarships can come from a variety of public and private sources. 

Federal Work-Study = Part-time jobs on or off campus that help students pay for college and give them practical professional experience. 

Loan = Money that has to be paid back with interest. 

Subsidized loan = A need-based loan that has to be paid back, but does not accrue interest until after the student graduates. 

Unsubsidized loan = A loan that starts accruing interest right away and continues to accrue for the lifetime of the loan.

Student Aid Index = SAI is a number used  to calculate the amount of federal student aid you are eligible to receive. It is based on the financial information provided in your Free Application for Federal Student Aid. This is not the amount of money your family will have to pay for college, nor is it the amount of federal student aid you will receive.

Gap = The amount that your family or student will need to come up with, on top of gift aid or loans, to cover the cost of attendance.

The financial aid process

Terminology, check. Now here's the skinny on the process. 

About three to six weeks after your student files the FAFSA, they will receive a Student Aid Report, while the colleges they selected on their FAFSA will receive the college version of the same thing (called a Student Information Record). 

The financial aid team at the college or university will then use the information you provide to see if your student is eligible for a financial aid package. 

This package is made up of a combination of funds from different sources —  grants, scholarships, tuition and housing waivers — and is all money that does not need to be paid back.

They may also provide you with offers for federal and private student loans, flexible tuition installment options where you pay a portion at a time, and student employment information. These are all options that help supplement where gift aid is not enough.

With all of this information in hand, you now need to review your offers, maybe from multiple universities, to make the best decision for you, your student and your family. It can be helpful to create an organized spreadsheet to compare all of the financial information for each school as you make your decision. Don’t worry, we’ve created one for you to copy and use. All you need is a gmail account to copy it to.

Once you have all of the financial aid letters in hand, comparing the data will be key to understanding the best options for your family. Costs will vary and you’ll need to factor in things like travel expenses if your student intends to go out of state, the cost of living where they will be, interest rates on unsubsidized loans, and any extra experiences that may increase the cost of education, like materials fees or study abroad expenses. 

Most importantly, remember that there is no one-size-fits-all financial solution for paying for college. It’s an important decision that can’t always be measured by looking at a college’s excellence rankings, or by weighing the return on investment for careers related to your student’s major. The training, experience, life skills and perspective that your student will get in college totally depends on the effort they put into it, whether they attend the local community college, a state school close to home or an Ivy League university across the country. So when you’re evaluating your financial options, ask yourself and your student, “What are we prepared to contribute financially? How will their experience at School A be different from their experience at School B, and what is that worth to us?” 

And even more importantly, how will their degree prepare them to live a fulfilling life — one where they aren’t bogged down by debt — and what will they be prepared to contribute back to the community once they’ve earned their degree?