College Financial Aid Letters Explained

After weeks of anticipating their response, your dream college finally got back to you about your financial aid request. When you open up the envelope, the first thing you read is “Congratulations, you have qualified for an award!” However, before you start your victory dance, it’s imperative you understand exactly what this letter is offering!

What Is a Financial Award?

A financial award is a sum of money either gifted or loaned to a student to help them pay for their future schooling. As previously stated, some of these awards are gifts which the student is not expected to pay back.

Gift awards include the following

• ·         School Scholarships
• ·         Federal Grants
• ·         Non-federal Grants (from businesses and other entities)

While some of the awards are gifts, other awards are loans with different perks. Loans are sums of money that the students must pay back, usually accruing interest throughout a student’s college career.

Loan awards include the following

• ·          Federally subsidized loans (the government takes care of the interest of the loan while the student is in school)
• ·         Federally unsubsidized loans (the government does not pay for the interest on the loan, but the interest amount is usually lower than private loans)
• ·         School repayment options (the school allows a student to repay their semester’s cost throughout the semester)
• ·         Private loans (the school offers a loan from a specific lender such as a bank or other financial institution)

Unfortunately, many financial aid letters are unclear about an award type. Some of the listed awards may be grants; other awards may be loans that the student has no information on. Therefore, researching these awards is the first step to understanding financial aid letters.

Schools Are Not Forthcoming About True Cost

Many schools do not list the cost of obtaining a 4-year education in their financial aid letter; other schools list a “tuition cost,” but purposefully leave out room and board and other expenses. Therefore, it is up to you to figure out the actual cost of a 4-year education at a specific school by researching the school’s charges and comparing them to your grants. You should view loans as costs since you will have to pay them back. Once you count up your expenses and subtract your grants, you will find the true cost of your school.

Get the Help You Need

If you need help calculating your student tuition and determining your next steps, American Investment Planners is here to help.  Our intuition’s goal is to help people stay financially sound, even when they go into debt from tuition payments. We believe financial planning is the answer to almost every financial issue! Contact us now for a free quote!