Decoding the Confusion: Financial Aid Award Letters

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As an incoming college student, you’ve likely applied for more than one school.

Reading and understanding financial aid award letters from each of your options can be challenging. You may even be wondering what a financial aid award letter is or what’s included in one.

If you qualify for some form of federal student aid, your award letter can include confusing or even misleading information that can make it hard to know exactly what you’re getting.

If this is how you feel, you’re far from alone. Here’s what you need to know about your financial aid award letter.

What is a financial aid award letter?

If you’ve filled out a Free Application for Federal Student Aid (FAFSA), you’ll receive a financial aid award letter from your school. This letter provides essential details about the monetary assistance you’ll be receiving from your school — particularly in the form of federal aid.

But if you’re a high school student comparing multiple colleges, you may notice that financial aid award letters can look different from school to school. You may also find that information is missing, confusing, or even misleading in some letters.

If you’re looking at financial aid award letters and aren’t sure what to make of them, here are some tips to help.

How to read your financial aid award letters

Award letters can be confusing — but don’t assume you’re the reason why.

Think tank New America reviewed 515 award letters from different colleges around the U.S., and some of the information they found was disheartening. We’ll cover each important point in turn and share what you can do about it.

Confusing terms

If you’re not familiar with financial aid jargon, you may have to look up some definitions to get an idea of what you’re getting.

But even if you are, the terminology doesn’t always match up.

For instance, 455 colleges used 136 different terms for unsubsidized student loans — federal loans where the government doesn’t pay your interest while you’re in school — and 24 didn’t even include the word —loan.”

Start by looking up any term you don’t understand on the school’s financial aid webpage. If you’re still not sure what something means, call the financial aid office directly to get the information you need.

Lack of cost information

More than a third of colleges in the study didn’t provide clear details about how much it costs to attend the school.

This can make it challenging to determine how valuable an award package really is.

Also, only 40% of colleges actually calculated what students would need to pay after applying financial aid. Of those, there were 23 different methods to determine that number.

If you can’t find this information or it’s confusing, look up the cost of attendance on the school’s website. You’ll typically get figures for tuition and fees, room and board, supplies, books, transportation and more.

Misleading aid packages

A whopping 7 in 10 award letters didn’t break down the different types of aid offered.

So what qualifies for aid? It can include scholarships, federal loans, grants, work-study and even more in some instances.

With scholarships and grants, you don’t have to pay that money back or do anything to receive it. But that’s not the case with loans and work-study programs. If your aid package isn’t broken down into different types, contact the financial aid office directly to get those details.

Also, keep in mind that some 15% of schools include Parent PLUS Loans as part of the award package. This can make packages seem more sizeable than they really are for students whose parents aren’t planning to borrow money. Keep that in mind as you review what’s included in your packages.

Finally, about 70% of schools don’t explain how work-study differs from other aid types (hint: it can help students get part-time jobs to help them pay for school). If work-study is included in your package, call the school to find out what that entails.

Unclear next steps

Now that you know how much financial aid you qualify, what’s next?

Unfortunately, only about half of award letters provide details about how to accept or decline your award. What’s more, that process can vary from school to school.

If your letter doesn’t tell you exactly what you need to do with the information it provides, you may be able to find it on the school’s financial aid office website. If not, call the office directly to get that information.

No alternative ways to pay for college

The purpose of a financial aid award letter is to show what kind of aid you qualify for from the school.

This means that other ways to pay for college, such as getting a job that pays better than work-study program jobs, private scholarships and grants, private student loans, and more — aren’t included.

Before you accept an award, especially one that involves borrowing money, look at your other options to see if you can get the money you need without loans. Use websites like and Fastweb to search for scholarships and grants from private organizations, and also look for potential part-time jobs in the area to take advantage of.

As for private student loans, it’s generally better to apply for federal loans first because they don’t require a credit check and typically offer lower interest rates. But if you still need funds after you’ve maxed out your federal loan allowance, take some time to shop around and compare private loan rates before you settle on a lender.

The bottom line

When deciding which college to attend, it’s essential to understand how much it’s going to cost and what type of aid you can receive.

The problem is that finding the information you need and knowing how to contextualize it can be difficult.

The most important thing to do is to avoid accepting an award letter without making sure you understand the offer completely. Familiarize yourself with the terms included in the letter and match them up with other letters to ensure you’re comparing apples to apples.

Finally, make sure to put each financial aid package in context. You may receive more money from one school, but if the cost of attendance is much higher than other schools, you may still end up paying more out of pocket or borrowing more in student loans.

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