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Tool | September 2013

How to Interpret a College Financial Aid Letter

This letter represents an example of an award for a family with high need. Although it appears that the college has offered a full ride, it actually meets the family's need with loans – both need-based and non-need-based – as well as grants and work-study. Families are not obligated to accept the loans, but they may do so to meet their expected family contribution and to fill any gap the college has left between grants and the cost of attendance.

Scroll over the items in blue in the sample college financial-aid letter below to learn how valuable each type of aid really is.

Special Report: Paying for College

Lakeside Crest

Lakeside Campus University
Office of Undergraduate Admissions
6278 Any Way
Lakeside, WA 01234

Dear Sara Student,

Congratulations on your admission to Lakeside Campus University! We look forward to welcoming you as a freshman in the fall of 2014.

The following is the financial aid award Lakeside Campus is able to offer you for the 2014-15 academic year. Please review the award carefully and indicate by June 1 which portions you plan to accept. You must report any outside scholarshipsTIP: Some schools substitute outside scholarships for grants. Others substitute them for loans or work-study. to the financial aid office.

Cost of Attendance (COA) Expected Family Contribution (EFC)The amount the parents and student are expected to pay toward college expenses.
Tuition and fees: $26,000 Student resources: $1,000
Room and board: $9,000 Parent resources: $3,500
Books and supplies: $1,000    
Transportation:Some schools omit this expense, reducing your potential for need-based aid.

TIP: Compare college award letters to see what costs are included.
$850    
Personal/miscellaneous:Some schools omit this expense, reducing your potential for need-based aid.

TIP: Compare college award letters to see what costs are included.
$1,400    
TOTAL COA: $38,250 TOTAL EFC:The college subtracts this number from the cost of attendance to calculate financial needs ($33,750). $4,500
  Fall Spring Total
Federal Pell GrantUp to $5,645 in 2013-14 for families with high need. $588 $588 $1,176
Federal Academic Competitiveness GrantFor high-need, first-year students who have completed a rigorous high-school program. 375 375 750
Federal Supplemental Educational Opportunity Grant (SEOG)Up to $4,000 a year (but often less) for high-need students.

TIP: This money runs out fast. Apply for aid early.
1,000 1,000 2,000
State GrantAll states offer need-based grants. Some also offer merit awards or blend merit and need.

TIP: States have their own deadlines for applying. Apply in time or miss out.
1,000 1,000 2,000
Lakeside Campus University AwardA grant or scholarship from the university itself.

TIP: Find out if and how the award can be renewed.
6,000 6,000 12,000
Federal Work-StudyA guaranteed part-time job, usually on campus.

TIP: Unlike an outside job, income does not count against next year's award.
1,000 1,000 2,000
Federal Perkins LoanNeed-based, with a fixed 5% rate. Interest does not accrue until repayment. Flexible terms, including deferral and forgiveness.

TIP: This is the next-best deal after the Federal Direct Loan.
2,000 2,000 4,000
Federal Direct Subsidized LoanNeed-based, with a fixed 3.86% rate for 2013-14. Interest subsidized until repayment.

TIP: The fixed rate and subsidized interest, plus flexible repayment terms, make this loan a good deal.
1,750 1,750 3,500
Federal Direct Unsubsidized LoanAvailable to students who apply for federal financial aid. Fixed rate of 3.86% for 2013-14.

TIP: The fixed rate and subsidized interest, plus flexible repayment terms, make this loan preferable to a private loan.
1,000 1,000 2,000
Lakeside Campus LoanSponsored by the college.

TIP: Not always a good deal. Examine the terms before signing on.
2,000 2,000 4,000
Parent PLUS Loan eligibilityFixed interest of 7.9% through the federal loan program. Basic credit check required. Flexible repayment.

TIP: Some schools count this loan toward meeting full need, but it is not really part of the award.
2,412 2,412 4,824
TOTAL AWARD: $38,250This award appears to meet full need. In fact, you're expected to take out loans.

TIP: The best award meets full need and fills it with grants, not loans.