How to read a financial aid award letter (with examples)
If you have applied for financial aid and got accepted to a college, you will receive a financial aid award letter. The financial aid award letter is important, because it allows students to compare various financial aid packages.
Unfortunately, financial aid award letters can be confusing. According to a 2020 report from Sallie Mae, only 25% of students and families found all of the components of the financial aid award letter easy to understand. Additionally, some award letters may not even break down the actual cost of attendance after financial aid is taken into account.
Jump ahead to:
- What’s in a financial aid award letter?
- How do I compare financial aid awards?
- Examples of financial aid award letters
On top of all of this, there are no standardized financial aid award letters so every letter may be a bit different!
That’s why we are here to help you! This way you can compare your financial aid offers and pick the best option.
What’s in a financial aid award letter?
While the formatting and organization of financial aid award letters may vary from letter to letter, there are a few things that are common:
Aid you are awarded
All financial aid award letters will include a list of aid that you were awarded and the actual amount of aid. This is calculated based off of your Estimated Family Contribution or EFC from your FAFSA and/or CSS Profile.
The types of aid you might see on your award letter include:
- Need-based grants including institutional grants, as well as Pell Grants and Federal SEOG Grants. These grants do not need to be repaid.
- Merit-based scholarships that you have been awarded by the institution. Merit scholarships do not need to be repaid.
- Student loans from the federal government which include Federal Direct Loans and Parent PLUS Loans. While student loans need to be repaid, Federal student loans generally have more flexible repayment options and lower interest rates than private student loans.
- Work study which allows students to find and apply for jobs on-campus (but sometimes off-campus) to earn money to contribute towards their education.
Student loan information
The student loan section in the award letter can be particularly tricky. A 2018 report from New America analyzed award letters from 455 colleges that included unsubsidized student loans listed the loans in 136 different ways. In fact, 24 of the award letters didn’t include the word loan at all.
Students should pay close attention to the specific types of student loans in their financial aid package. If there is anything that is confusing or not clear, they should contact their college’s financial aid office.
This is important because unsubsidized student loans accumulate student loan interest while the student is in college (unlike subsidized student loans). This makes these unsubsidized student loans less desirable for students.
Cost of attendance
In addition to the specific types of aid and amounts, the award letter will also have the cost of attendance including tuition, room, board, and other expenses.
It is important to know that generally this is just the cost for the upcoming academic year and does not include any potential increases in tuition, room, and board. According to research from The College Board, you can expect a roughly 3% increase in tuition, room, and board each year.
Your financial aid award letter will not include private scholarships that you might win. This is why there is so much upside for students who win private scholarships. And if you were planning on taking out student loans, every dollar in scholarships that you win is money that you won’t have to pay back in loans!
How do I compare financial aid award letters?
Once you have all of your award letters available, you will want to compare the data to see how the various awards stack up. The best way to do this is by viewing and analyzing the data in the same place. The Illinois Student Assistance Commission has a free comparison tool that includes all of the most important data fields. You can also do this yourself in a spreadsheet.
The most important aspect of comparison is to compare the net price of the college or the cost after financial aid has been taken into account. You will want to put student loans in their own category, because they will need to be paid back. This will also allow you to understand what your total debt load will look like after four years of college.
Financial Aid Award Letter Examples
Next, we will examine a few different financial aid award letter examples to show you what an award letter might look like. Specifically, we will be reviewing letters from a private college (Whitman College), a large public university (University of Wisconsin), and an Ivy League university (Princeton University).
Jump ahead to:
Whitman College (Walla Walla, WA)
This award letter includes three different scholarships, a Federal Pell Grant, and clearly distinguishes between the Direct Subsidized and Unsubsidized student loans. You will notice that you do not need to accept the loan portion of the financial aid package and also have the option to take out less money in student loans.
After all of the financial aid is taken into account, this family is responsible for $7,349. If the student chose not to take out Federal student loans, the family contribution would increase to $12,849.
University of Wisconsin (Madison, WI)
This financial aid offer from the University of Wisconsin looks quite a bit different from the letter from Whitman College. Notably, UW breaks down the award letter per semester, but also gives the yearly totals.
A few other things to point out:
- Differences in student loan terminology and amounts compared to Whitman College.
- The University of Wisconsin also includes $2,356 in personal expenses as part of the cost of attendance (this is not something Whitman factors in).
- Total cost of attendance is not everything. UW has a cost of attendance that is less than half of Whitman College ($28,013 vs. 63,954), but the actual cost for this student would be more: $15,946 vs. $7,349. Plus, the UW package includes more student debt.
Princeton University (Princeton, NJ)
This letter from Princeton includes some annotations that are for educational purposes only and will not be included on your actual aid award letter. However, we see yet another example of a financial aid award letter.
Unlike the other award letters we do not see any mention of student loans. This is because Princeton includes only need-based grants and not merit scholarships or student loans in their financial aid packages.