Understanding and Comparing Award Letters
College costs and financial aid awards can vary significantly from one school to another, therefore it is important that you carefully compare the types of financial aid that you have been offered and that you understand both the direct and indirect costs associated with attending each school. The following information was created to assist you with evaluating financial aid offers and college costs.
Once you have applied for financial aid, submitted all required documents, and have been admitted to a school, the financial aid office will provide you with a financial aid award letter (sometimes referred to as an award “package”). Award letters do not have a standard format, so each will have a unique look and provide different information.
Some schools will provide the award letter via the mail, while other schools will only provide the information electronically. Regardless of how you obtain the information, it is important to make sure that you have the necessary information from each school so that you can do an “apples to apples” comparison. Use FAME’S Comparing Costs & Financial Aid Awards to compare estimated college costs and financial aid awards.
Before determining how good a school’s financial aid award is, you must first determine how much that school costs to attend.
Cost of Attendance refers to the educationally related expenses that schools recognize, including tuition and fees, room and board, books and supplies, transportation and miscellaneous expenses. Some of these expenses will be charged directly by the school and these are referred to “direct costs”.
Direct costs include tuition and fees and room and board (if a student is living on campus).
Indirect costs are those expenses that the student has, but are not billed by the school, such as books and supplies, transportation, and other miscellaneous expenses.
When comparing award letters it is a good idea to focus on the direct costs. These expenses are the ones that are established by the school and the ones you have less control over. Each school is required to make this information available; some schools will list their costs on the award letter or in supplemental material that is sent with the award letter, while others will refer you to their website.
Be sure to obtain the cost of tuition and fees for the full year (full-time students typically enroll in 15 credits each semester for a total of 30 credits per year). Additionally, if living on campus, obtain the cost of room and board. Schools often offer a variety of living arrangements and meal plans, so be sure to find the one that matches your plans.
Direct Cost Examples
Below are some examples of direct costs (these are just for demonstration purposes and do not reflect actual costs at any specific school):
| Type of School |
Community College |
Public University |
Private College |
| Tuition and Fees |
$3,200 |
$9,000 |
$28,000 |
| Room and Board |
$7,300 |
$8,500 |
$12,000 |
| Total |
$10,500 |
$17,500 |
$40,000 |
The types and amounts of financial aid offered from one school to the next will vary dramatically. Not all schools have the same financial aid programs available to offer their students. Financial aid comes in three broad categories:
Grants and Scholarships – grants and scholarships do not have to be repaid and are funded through four sources: federal, state, institutional and private.
Federal Loans (Perkins & Direct Stafford) and Private/Alternative Loans – loan funds typically have to be repaid with interest and are funded through four sources: federal, state, institutional and private.
Federal Work Study or other Work Programs – these programs provide part-time employment opportunities to help pay college expenses. Work-study earnings are not automatically applied to the student bill, but instead are paid to the student throughout the semester as they earn the funds.
Below are some examples of a financial aid award (these are just for demonstration purposes and do not reflect the financial aid award of any specific school):
| Financial Aid Program |
Community College |
Public University |
Private College |
| Federal Pell Grant |
$5,550 |
$5,550 |
$5,550 |
| Federal Supplemental Grant |
$0 |
$500 |
$1,000 |
| Maine State Grant |
$1,000 |
$1,000 |
$1,250 |
| College Grant |
$0 |
$750 |
$18,000 |
| Federal Perkins Loan |
$0 |
$2,000 |
$3,000 |
| Federal Subsidized Direct Stafford Loan |
$3,500 |
$3,500 |
$3,500 |
| Federal Unsubsidized Direct Stafford Loan |
$0 |
$2,000 |
$2,000 |
| Federal Work-Study |
$0 |
$2,000 |
$2,500 |
Scholarships and grants are “free money” and are applied to your bill. Loans need to be repaid and are also applied to your bill. Work-Study funds are earned so do not have to be repaid and are not applied to your bill. Because of these differences, it is a good idea to total the types of aid on your award letter into three categories.
| Categories |
Community College |
Public University |
Private School |
| Grants and Scholarships |
$6,550 |
$7,800 |
$25,800 |
| Loans |
$3,500 |
$7,500 |
$8,500 |
| Work-Study |
$0 |
$2,000 |
$2,000 |
Next, retrieve the direct cost and then subtract each of the categories of aid to get a true “apples to apples” comparison:
| |
Community College |
Public University |
Private School |
| Direct Costs |
$10,500 |
$17,500 |
$40,000 |
| - Grants and Scholarships |
-$6,550 |
- $7,800 |
- $25,800 |
| Balance after grants and scholarships |
$3,950 |
$9,700 |
$15,800 |
| - Federal Loans |
- $3,500 |
- $7,500 |
- $8,500 |
|
Balance after grants,
scholarships and Federal loans
|
$450 |
$2,200 |
$7,300 |
By following this example, you will be able to determine each school’s cost after grants and scholarships, and then after loans. In this scenario, the lower cost school ended up being the most affordable after the financial aid was applied. That is not always the case as some schools, particularly privates, may offer sufficient grant and scholarship funds of their own so that their school may be the most affordable. The only way to know for sure is to go through the steps described above.
As always, before borrowing loans, research your options thoroughly and understand all of the terms and conditions. Federal loans often have lower interest rates and also have significantly better repayment and deferment options. Borrowing private or alternative loans should be considered a last resort.