As high school seniors look ahead to college, they might think the first big challenge of university life will come from class essays or midterm exams.
Not so. Their first assignment is making its way to them right now, as financial aid letters start arriving in mailboxes around the country.
Assessing award letters is no “easy A” either. This can be tricky graduate-level coursework, with financial effects that will ripple in your life for years or even decades to come.
“For most people, this is the first large financial decision that they will ever be involved in,” says Ashley Boucher, a spokeswoman for lender Sallie Mae. “They have to treat it just as you would any other enormous decision, like getting a mortgage. So families should do this together, and be savvy shoppers.”
After all, there’s a lot of money on the line.
Average annual tuition and fees for in-state students at public four-year colleges have hit a record $10,230, according to the College Board. Out-of-state students pay $26,290 on average, and private nonprofit colleges charge a whopping $35,380.
And those are just tuition numbers, not including the many other costs involved in attending college, such as room and board or textbooks. The more money you can secure to defray all this, the better.
So, what makes decoding financial aid letters such a tricky assignment?
“Financial aid award letters are not regulated, so they often look very different from each other,” says Jodi Okun, owner of California’s College Financial Aid Advisors. “Since you are not seeing the same format, it is easy to get confused as to what exactly each college is offering.”
First, the basics: To get to this point, a student should have already completed a form called the Free Application for Federal Student Aid (FAFSA), which details your family’s financial information. Colleges take that data, examine your eligibility for federal, state and institutional assistance, and put together an aid package following your acceptance.
The headline number you are looking for in the aid package is the “cost of attendance,” which estimates the total dollars that students pay annually. That figure includes tuition and fees and room and board, as well as related costs like textbooks and supplies and transportation.
After that, you are looking for the “free money” they are offering, in the form of grants and scholarships. That’s cash you won’t have to pay back.
Subtract this gift aid from your cost of attendance, and you are left with what’s called the “net price”—the dollars you will actually be forking out for college.
To pay for that, you will likely be offered additional aid in the form of various loans and work-study programs. The aid package will also factor in what’s called your “expected family contribution” (EFC)—money it expects you’ll contribute from sources such as a 529 college savings plan or family income.
Now to make the big decision. First and foremost, keep in mind these aid letters are offers —you are not obligated to take whatever a college decides to give you. Compare, contrast, shop around, and make the decision that’s right for you.
Here are five tips from financial aid experts to help you:
1) Compare apples to apples. One college may offer you what seems to be a bigger aid package. But bigger doesn’t necessarily mean better . Break down the offer to compare how much free money you’re getting from each contender, and how much in loans. Look at those comparisons over time: Some colleges may “front-load” grants and scholarships to lure you but then offer less support in ensuing years. Boucher advises creating a spreadsheet to really dig into the numbers.
2) Crunch the numbers. You’ll also need to make sure you’re accurately comparing the cost of attendance. For example, colleges might only mention the notable costs, such as tuition and fees, and omit others. Others might estimate costs at levels that seem unrealistically low. That is not the full picture, so be prepared to call the school’s financial aid office with questions to help you fill in any blanks.
3) Call in help. You are not alone in this journey, and there are some excellent resources to help you figure out what can be a confusing process. The federal site studentaid.ed.gov is a useful starting point, SallieMae.com/awardletters will help you decode your various aid packages, and CollegeNavigator.gov has good data on pricing and aid averages at different colleges.
4) Watch for deadlines. The big date to keep in mind is May 1 (aka College Decision Day), the broad deadline many colleges set for deciding your attendance. You can theoretically change your mind after that, but since many pots of student aid are first-come, first-served, it is better to lock offers down early. But check your offer: Colleges may have their own, earlier response deadlines listed, which you need to adhere to.
5) Appeal if necessary. Aid numbers in your package were compiled using 2017 tax-year data, and it is very possible that your life circumstances have changed since then. Perhaps there was a job loss in the family, or big medical bills, says Okun. If so, talk to the college’s aid office so they can adjust their package accordingly.
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