Financial Aid Award Letters: Cost of Attendance and Net Price

In Paying for College on Apr 08, 2016

It's crucial to understand all the terms on your financial aid award letter and how to interpret it. With college being such a large expense, you need to know exactly what each line item refers to. Two of the terms you'll see on your letters are cost of attendance and net price.

Cost of Attendance (COA)
This is the cost of attendance should include all college costs, including tuition and required fees, room and board, an allowance for books, supplies and equipment, transportation to/from school and an allowance for miscellaneous/personal expenses. The cost of attendance may also include the cost of a computer, software and peripherals, a health fee and dependent care costs.

About one-third of financial aid award letters don't provide information about the college’s cost of attendance. Even if the award letter lists the cost of attendance, it may not include all costs. Some colleges list only direct costs, which are paid to the college, and omit indirect costs, such as costs for textbooks and transportation. Allowances for textbooks and transportation may also be underestimated, making the college seem less expensive. Typically, about half of the cost of attendance at a public college will come from indirect costs.

Net Price
The net price is the difference between the cost of attendance and the gift aid. It is the discounted sticker price, the amount of money you will have to pay from savings, income and loans to cover college costs.

Net Price = Cost of Attendance – Gift Aid

When calculating the net price, be sure to start with the full cost of attendance, not just the direct costs.

Then, carefully distinguish grants from loans. Award letters have a tendency to blur the distinction between grants and loans. They list loans just like grants, with an award name and award amount, and without any information about interest rates, monthly payments and other loan terms. The award letter may mix together grants and loans, or draw artificial distinctions between need-based and non-need-based loans.

Loans must be repaid, usually with interest. A need-based loan may be less expensive, but it is not really financial aid. Loans do not cut college costs.

To identify loans, look for award names like Stafford, Perkins, PLUS, Direct, Subsidized and Unsubsidized. Also look for common abbreviations, like Staff, Sub and Unsub. The letters L and LN may indicate that the award is a loan.

If you are unclear as to whether something is a loan or a grant, call the college’s financial aid office for a clarification.

Once you’ve identified all the grants and scholarships, calculate the total amount of gift aid. Subtract the total gift aid from the total cost of attendance. This difference is the net price.

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