Comparing Financial Aid Awards
March means acceptance letters are arriving—and that means it’s time to start interpreting financial aid award letters. With ongoing uncertainty around federal education policy and student loans, it’s more important than ever to make thoughtful financial decisions about college.
For most families, cost plays a major role in the final college decision. But comparing financial aid offers can feel like comparing apples to taco salad. The good news is that all award letters must show the school’s total Cost of Attendance (COA), the gift aid offered, and any self-help aid such as loans or work-study. Unfortunately, schools have wide latitude in how they present that information.
There are really two parts to comparing college costs:
What’s in the award letter
What’s included in the school’s Cost of Attendance
Understanding the Award Letter
The award letter itself is the easier part—once you know what to look for. Your goal is to determine your actual annual out-of-pocket cost at each school.
At the top of the award letter you’ll usually see the total Cost of Attendance before aid is applied. This is typically broken into:
Direct-billed costs
Tuition
Fees
On-campus room and board
Indirect costs
Books and supplies
Personal expenses
Transportation
Off-campus housing estimates
Next comes gift aid—scholarships and grants. These may include institutional aid from the college as well as federal or state grants.
Many award letters also list self-help aid, such as:
Federal Work-Study
Subsidized Direct Student Loans (if eligible)
Unsubsidized Direct Student Loans
Parent PLUS loans
Remember: loans and work-study are your money. They help pay the bill, but they are not discounts.
To determine your true cost, remove loans and work-study from the calculation and focus on the remaining amount you’ll need to cover with savings, income, or outside scholarships.
Also double-check whether the amounts listed are per year or per academic term, since schools sometimes present them differently.
Pay Close Attention to Loan Assumptions
This year in particular, it’s important to understand the loan components of your financial aid package before accepting admission.
The Direct Student Loan program is expected to remain available, but families should be cautious about assuming that Parent PLUS loans will continue in their current form or how quickly they will go through the per-student total amount. When comparing schools, make sure the college remains affordable even if borrowing options change.
What’s Included in Cost of Attendance?
The more complicated part of comparing colleges is understanding what’s included in Cost of Attendance.
Financial aid rules state that total aid and borrowing cannot exceed COA. Because of that, colleges take different approaches when calculating it.
Some schools—especially those that meet a high percentage of financial need—include nearly every expense a student might incur. Others keep the COA estimate lower, partly to discourage excessive borrowing. Most fall somewhere in between.
To make accurate comparisons, look a little deeper.
Housing and Meal Plan Options
Check whether you have choices for housing or meal plans.
One of my children applied to two schools: one used the most expensive dorm and meal plan in its COA estimate, while the other used the least expensive option. On paper, one school appeared to cost about $7,000 more per year—even though the real costs were quite similar.
Items You May Be Able to Waive
Some COA items may be optional.
For example, my daughter’s college includes the student health insurance plan in its Cost of Attendance. Because she’s covered under our family plan, we can waive it—reducing the actual cost by nearly $5,000 per year.
Books and Personal Expenses
The estimates for books and supplies are often just that—estimates.
One of my children’s schools lists $3,000 per year for books, while the other estimates $800. Neither number reflects the real average for their majors.
A good strategy is to ask admissions to connect your student with a current student in the same major and simply ask what they actually spend.
Don’t Forget Travel
If the college isn’t local, build a realistic travel budget.
Many students travel to campus in the fall, come home for Thanksgiving, winter break, and spring break, and return home at the end of the school year. You may also want to budget for your own travel to visit them: dropping them off in the fall, going to parents' weekend, or other intended visits.
Get the Inside Scoop
A surprisingly good resource for understanding real costs is the Facebook parent group for each school your student is considering. These groups can be full of practical insights about housing choices, hidden costs, and budgeting for that particular campus.
How Aid Renewals Work
Another key question when reviewing award letters is how scholarships and grants renew.
Need-based aid—often called grants—is recalculated every year using that year’s FAFSA and, if required, the CSS Profile. Families with fluctuating income should run the colleges’ net price calculators at different income levels to see how awards might change.
Merit scholarships usually come with requirements such as:
Maintaining a minimum GPA
Staying enrolled full time
Meeting program requirements
Be sure to understand those conditions before committing.
A Tool to Help You Compare
If you’re trying to compare multiple award letters, having a consistent worksheet can make the process much easier. My book, How to Pay for College, includes a downloadable worksheet designed to help families make clear, apples-to-apples comparisons between financial aid offers.
