How to Read Your Aid Offer
Think tank New America conducted further research published in 2021 on what elements are necessary for a user-friendly financial aid offer experience. This research, alongside guidance from the Federal Student Aid office, identifies key elements that enable students to make informed decisions about their education. It can also help students know what to look for or ask questions about.
1. Look for the Cost of Attendance (COA)
One of the most critical pieces of information is how much it will cost you to go to school for one year. It should be in your letter, but if it doesn't include this, you can find the cost of attendance on your school's website.
It should have direct costs, which are paid to the university and are usually broken down into tuition and fees, and room and board (or housing and meals).
It should also include some estimates of things you may need to pay for throughout the year or indirect costs. This may look like textbooks and school supplies, transportation, and other personal expenses.
2. How much gift aid did you receive?
Gift aid includes grants and scholarships from the federal government, your state, and your school, which you do not have to pay back.
Your school should separate gift aid from loan offers and work-study funds. If they don't, make sure you add up all your gift aid funding separately so you know how much you can take off your total cost for the year.
3. Student loans
The most common loan offers are federal student loans, sometimes called Stafford loans. The federal government offers two types of student loans for undergraduates: Direct Subsidized and Direct Unsubsidized Loans.
Subsidized loans are generally the better option because they don't gather interest while you're in school. Unsubsidized loans start gaining interest as soon as you take them out. Both are typically a better option than private student loans, however.
You may also see two other types of loans on your financial aid offer: private loans from your college, and the Parent PLUS Loan for dependent students. As we've already seen, private loans typically aren't the best option for students. The Parent PLUS Loan is something a student's parent can take out if they are approved, which requires a credit check.
4. Figure out your Net Cost (what's left over for you to pay)
Your net cost is how much a year of school will cost after gift aid. If your letter doesn't include it, take the total cost of attendance for the year and subtract the total amount of gift aid you received. This is how much you'll need to pay using student loans, a Parent PLUS Loan, savings, a work-study job, additional scholarships, or other funds.
If you need to take out student loans to help pay for school, our Guide to Student Loan Debt will outline your options and help you make financially informed decisions about your college payment plan.
5. Next steps
Usually, you will be able to accept or decline aid, including student loans, through your school's website. If your letter does not have a deadline you need to respond by, contact your financial aid office to find out when you need to make a decision. You should also contact them if you have any questions. It's important to understand what your options are and what you're signing up for before you accept or decline.