Understanding the Terms on Your Financial Aid Award Letter

on March 23, 2016

Each spring, countless students anxiously await the arrival of their financial aid award letters.

For many of you, receiving your award letters from your colleges or universities is the most important part of your entire college decision process. Your award letter is the document that will outline your financial aid package from each school: the expected family contribution, scholarships, grants, loans, and what has to be paid out-of-pocket. If only reading and understanding these award letters was an easy task!

If you’re having a hard time reading and comprehending your award letters, you're not alone. Many award letters/award packages from colleges are difficult to understand, especially if you’re unfamiliar with some of the terminology in the letter.

The first step to understanding your award letters is to decipher the amount you’re being given, the amount you’re borrowing, the amount you must pay out-of-pocket, and if all of these amounts cover the total cost.

Here's what you need to know:

Cost of Attendance (COA): How much the college predicts it will cost for you to attend their school (usually for one year). This will be the largest number on your award letter if it’s included, but keep in mind not all schools list the COA on their award letters. Typically it includes the price of tuition, room and board, books and supplies, transportation, fees, and miscellaneous expenses. The items included in the COA can vary from school to school. 

Direct Costs: These are costs paid directly to a college instead of a third party and will include things like tuition and fees.

Indirect Costs: An estimated amount the college predicts you may need to pay as an enrolled student on their campus that aren’t paid directly to the school. Examples include books, supplies, transportation, personal expenses, and miscellaneous expenses. A student can still enroll in classes for the following term without these items being “paid for.” They’re just suggested amounts in order to help the families better prepare.

Expected Family Contribution (EFC): This is the amount your school believes your family is able to contribute toward your college education. This amount is usually based on information from your FAFSA.

Financial Need: This is your “gap” in financial aid. In other words, this is your COA minus all other financial aid, otherwise known as the money you and your family will have to pay out-of-pocket to cover the remainder of your expenses.

Total Award: The total amount of money you’re receiving in financial aid through loans, grants, scholarships, and work-study.

Gift Aid: Grants or scholarships that don’t need to be repaid.

Grants: Money that’s being given to you that you do not have to pay back. This funding can come from the college, the state, or a federal program.

ScholarshipsMoney you’ve been given and don’t have to pay back. You can receive scholarships directly from a college or other organization if you meet a certain set of criteria (examples include athletic ability, academic accomplishments, and leadership capabilities).

Self-Help Aid: This is aid that relies on a family or student’s own resources and can include work-study programs or student loans.

Work-Study: The amount of money you’ll receive toward your college costs in return for working on campus. This money must be earned in order to receive it.

Loans: Money that is borrowed to pay for college that you must pay back (plus interest) once you have graduated or if you ever drop below part-time status.

Net Price: The COA minus any gift aid you’ll receive.

Questions to Consider before Accepting Your Financial Aid

  • For the EFC, do my parents/guardians really have this amount to put toward my education? If not, then you’ll have to add this amount to your out-of-pocket expenses.
  • Can I expect these grants/scholarships every year? Pay close attention to whether your “free money” is renewable (received every year), or it is a one-time award. If you are being offered one-time awards, will you able to pay for this school in subsequent years?
  • Will I be able to maintain the requirements needed to keep any scholarship?
  • Am I able and willing to work through a work-study program in addition to going to school?

If upon reviewing your award letter, you discover you still don’t have enough money to pay for college, there are a few options you can take. You can apply for private student loans through a bank, or apply for more scholarships on Cappex.com.

If you still have any additional or specific questions regarding your award letter, be sure to reach out to your school’s financial aid office. 



When financial aid and federal student loans aren't enough to cover all college costs, consider financing the gap with private student loans. Shop around to find the loans that best fit your needs.

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