Comparing Financial Aid Award Letters
Look carefully at your award letters: Letters from different schools will probably have their figures and costs in different formats. Compare award letters to see how their offers measure up. Ask if outside scholarships will affect your aid.
Compare loan offers: Interest rates, how interest compounds, repayment terms and cancellation provisions can vary widely loan to loan.
Compare affordability of aid offers over time: Ask how your financial aid package will change over time. The aid package made available to you in your senior year may look very different from the one you were offered freshman year.
Look beyond the “sticker price”: The school with the lowest cost of attendance may not be the most affordable. The amount and type of aid offered will influence affordability.
Don’t accept an offer just because it has the lowest “unmet need”: You may save more by accepting an offer with a higher unmet need, if the aid package offers scholarships, grants and work-study instead of loans.
Compare like terms: How do the schools determine cost of attendance? Do they all include direct costs as well as indirect costs? How do they handle outside scholarships? What work-study options are available? What are wages like? Can you substitute work for a loan?
FastWec. Student Bulletin. Feb./ Mar. 2006 High School Edition
Financial Aid Guide: Key Terms Defined
Federal Aid: Aid that comes from the U.S. Government. Usually disbursed through your college.
Gift Aid: Financial aid that does not need to be paid back:
Grants: Typically based on financial need
Scholarships: Typically based on achievement or talent
Loans: Funds that must be paid back later, with interest. Federally-guaranteed loans can be from a private lender (e.g.; a bank) or from the federal government (administered by your college). Private loans are offered by private lenders with terms set by the lender, not the government.
Private Aid: Financial aid from non-government sources.
Basic Loan Terms
Interest: An annual charge for borrowing money, expressed as a percentage of the loan balance. Interest rates are either variable (the rate can change) or fixed (the rate will not change).
Annual percentage rate (APR): The overall cost of borrowing money, expressed as an annual percentage of the loan balance. The APR combines the interest rate with the loan fees and also include the effects of compounding.
Default: Failure to repay your loan; it may lead to legal action to recover the money and can affect your credit rating.
Delinquent: When at least one loan payment is late or missed. Serious delinquency may result in default.
Principal: The full amount borrowed. During repayment, it refers to the portion of the original amount still owed (not including interest).
Loan Fees: One-time charges to originate or guarantee a loan, expressed as a percentage of the loan balance.
FAFSA – Free Application for Federal Student Aid: the form used to determine the amount of federal and state aid for which you are eligible.
Dependency Status: If you are considered a dependent student, colleges will count parent income, assets and circumstances in addition to your finances in awarding aid.
SAR – Student Aid Report: The official notification sent to students after the FAFSA is received. This document will state your Expected Family Contribution (EFC).
Award Letter: List of types and amounts of aid that your prospective school is offering. You are not required to accept all aid.
Financial Aid Package: The total financial aid you are offered, including scholarships, grants, work-study and loans. This information is typically summarized in an award letter.
Financial Need: The difference between your educational costs and the EFC.
COA – Cost of Attendance: This figure includes the total price of tuition, fees, room, board, books, supplies, transportation and personal expenses for one academic year of education (also known as Student Budget).
EFC – Expected Family Contribution: A measure of your family’s financial strength based on income, assets, family size, etc., based on FAFSA. The EFC represent the amount of money the federal government believes your family is able to contribute toward college. *The amount you end up actually paying could differ form the EFC, depending on what resources available at your college.
Federal Aid Programs
Pell Grant: Gift aid that is given based on financial need. How much aid you will be eligible to receive is based on you EFC. Current maximum is $4,050.
Federal-Work Study: Provides part-time employment for students who have financial need. Jobs are usually available both on and off campus.
Perkins Loan: Fixed low interest (5%) loan through your college. You must demonstrate financial need. Current max per year for undergrads is $4,000 (max. total is $20,000).
Stafford Loan: Currently a variable interest rate loan (pending legislation could change this loan to a fixed rate loan). You can receive this loan from a private lender or your college. They can be subsidized (no interest accrues while in school) or unsubsidized (interest accrues while in school).