Decision Day is coming up May 1st, and while there are a number of different factors that may influence your decision, for many students affordability is one of the most important. A helpful tool for figuring out if a school makes sense to you financially is your Financial Aid Award Letter. If you’re accepted, have completed your FAFSA and listed the school on it, you should receive a letter from the college. The FAFSA helps to determine your Expected Family Contribution (EFC) which, in turn, helps to determine how much aid you’ll need, or if you’ll need to seek out other ways to fund your education. Your letter usually will arrive a few weeks after you receive your acceptance.
While each school’s letter may look a little different, they each will have information about the Cost of Attendance (COA), how much your family is expected to contribute (based on your FAFSA), how much financial aid you’ll receive from the school, and how much is left over that you will be expected to cover. While that sounds simple enough, it might be a little more difficult to decipher which parts of the letter are scholarships, loans, or other types of aid such as work study and this information is extremely important–you’ll have to pay back those loans (with interest!)
COA, EFC, Out-of-Pocket Cost & Net Price
Cost of Attendance (COA), Expected Family Contribution (EFC) and Net Price are all important numbers that you’ll see, but how do these actually affect how much you’ll be paying for college? The COA will give you a number for how much one year of tuition, fees, books, room and board and other potential costs will be. Each year this may change and this number is determined before any scholarships, grants or loans are applied to your personal financial situation. Most schools will then take the EFC determined by your FAFSA and subtract this from the COA before they decide how much aid they can give you. While your Cost of Attendance might be intimidating, remember, that’s not necessarily how much you’ll be paying. Once you figure out how much aid in the form of scholarships and grants you’re being offered, you can subtract this from the COA to determine your Out-Of-Pocket Cost–the actual amount of money that you’ll need to pay with through loans or other means. What you’ll ultimately paying–and the number that might be the most important when comparing schools–is the Net Price. This number is what you’ll ultimately cover with private, federal Plus loans, or other means that is determiend by subtracting need-based laons from your Out-of Pocket Cost.
Decode the Letter
Usually, you’ll see a total award amount with a breakdown of where the money is coming from for each semester. Make sure you pay close attention to this part, because there may be confusing acronyms that make it hard to figure out if this is free money or a loan–sometimes it will be as confusing as just including the letters “L” or “LN”. We recommend circling the loans so you know how much money you’ll pay back, and then doing research on the kinds of loans the school is offering. Common loans include federal Stafford loans, which are either subsidized (often abbreviated “sub”) or unsubsidized (abbreviated “unsub”) and some schools will include Parent Plus loans. Unsubsidized federal Stafford loans will accrue interest while you’re in school; the subsidized versions do not. Parent Plus loans, unlike the Stafford loans, are loans that go in the parent’s name, versus that of the student, so parents should pay close attention to any of these loans awarded in a Financial Award Letter. Additionally, some award letters will refer to private loans from a preferred lender list. You’ll want to contact the lender directly and decide if this is an option for you.
Accepting Loans & Covering the Gap
Taking some time with your Financial Aid Award letter will pay off (literally!) in the long run and help you determine which school will be giving you the aid you need with a level of student loan debt that’s manageable for your situation. If you end up accepting student loans, it’s helpful to remember you don’t have to take out the entire amount being offered if, for example, you think you’ll spend less money on books or room and board. You’ll also be required to participate in entrance counseling and to sign a Master Promissory Note (MPN) where you’ll agree to pay the money you borrow back.
Another situation to consider is that even after you’ve accepted loans, you might have a gap between your aid and loans and the cost of the school. There are a few ways you can “cover the gap”, such as applying for more scholarships (which you can find on College Greenlight.)