How to review your financial aid offer
Understand your first offer so you can negotiate for a better one
What you do with your financial aid offer can make a $1,000+ difference in how much you end up paying for college. The first step to getting a good deal is understanding what each college offered you, so you can compare and then negotiate.
As many of you have already discovered, colleges often use confusing language and leave out information when discussing financial aid. A study of 11,000 financial aid offers found that colleges used 136 names to describe the same loan, and more than a third of schools did not include any information about cost. Seriously!
To help fill the gap, I put together an overview of the most important things to look for in your aid offer, and what all those terms really mean.
Finding your aid offer
Check your email or student portal for an aid offer from each college. Colleges use various names for aid offers—award letter, financial aid package, award notification—but, regardless of what they call it, all the colleges that accepted you and that you listed on your FAFSA should have sent you a document like this.
A college may have also notified you about a scholarship in your acceptance letter. This is not your aid offer. Your aid offer should have a complete list of all the programs you qualified for, the dollar amount for each program, and the estimated costs of going to that college.
If you checked all your inboxes and haven’t found it, your college may need more information from you before they can process your financial aid. In that case, send an email to the financial aid office requesting your aid offer.
Grants and scholarships
Also called gift aid, grants and scholarships are free money for college that you don’t need to pay back. Your aid offer should tell you the name and dollar amount of each grant or scholarship, at a minimum. If you can’t tell just by looking at the aid offer, ask your college for the source of each grant and scholarship (federal, state, college, outside organization) and whether the award is one-time or renewable (renewable scholarships are worth more).
Institutional aid: These are grants and scholarships from your college. When you did not apply for a specific scholarship from your college but were offered it anyway, your scholarship is more of a discount than a gift—and discounts are very negotiable!
Federal grants: There are two main federal grants, the Pell Grant and the Federal SEO Grant. The amount of Pell Grant you get is determined by your EFC from FAFSA. The amount of Federal SEO Grant you get is up to your college, and you can ask them for more if you’re not receiving the maximum of $4,000.
State aid: Your state likely offers its own grants and scholarships. Usually, you can only receive this money at an in-state school. If you applied for a state aid program and don’t see it on the aid offer of your in-state college, ask the financial aid office if they can add it to your offer. Sometimes, just asking works!
Private scholarships: If you applied to and won scholarships from outside organizations, and told your college about it, your college may put it on the offer. Telling a college about a scholarship may result in your institutional aid being reduced, so only tell your college if you live in a state where scholarship displacement is banned or if your college requires you to do so.
Work-study programs
Work-study is money that you earn through an on or off-campus job and use to pay your college costs. Like most part-time jobs, you’ll get paid hourly at least minimum wage. The federal government has a work-study program, as do some individual states and colleges. It’s sometimes possible to participate in multiple programs so you can earn more money.
If you qualify for work-study, you should see the name of the program and the total amount you can earn over the course of the year. The maximum amount varies, so ask your college if you’re receiving it. If you don’t see work-study on your offer, it’s likely because FAFSA determined you don’t have financial need. If you have financial need but don’t see it, ask your college.
Optional federal loans
Optional is the operative word here! Just because you see a federal loan on your financial aid offer doesn’t mean that you must or have already taken out that loan. It just means you have the option.
Your college might lump in loans with your grants and scholarships, or they may put it in a separate section called ‘Self-Help Aid.’ Regardless of where they put it, remember that loans are money that you’ll pay back, and therefore part of your contribution to your education—not a gift or support from your college (even if it’s positioned that way). That’s why, if you negotiate your financial aid, I recommend excluding loans from your calculation of the amount of financial aid you were offered.
There are three types of federal loans, and you may qualify for one, two, or all three. If your state or college has its own loan program, your offer should have information about it too. Like with all programs, you should see the name and the maximum dollar amount. For undergraduate loans, the amount you can take out increases each year of college.
Federal Direct Unsubsidized Loan: This is a loan for students. It’s unsubsidized meaning that the loan accrues interest at a rate of 4.99% while you’re in school, even though you don’t have to make payments until after graduation. Because of the interest rate, you’ll end up paying back more than you originally took out. Use a student loan calculator to estimate how much you’ll pay in total.
Federal Direct Subsidized Loan: You’ll only see this other loan on your financial aid offer if FAFSA determines you have financial need. This loan has the same interest rate as the unsubsidized but does not begin accruing interest until after you complete your undergraduate degree, meaning it’s cheaper for you in the long run. Take out the maximum amount of subsidized loans before you take out any unsubsidized loans.
Parent PLUS Loans: Seeing a Parent PLUS Loan on your aid offer doesn’t mean your parent has actually taken it out or even qualifies for it. Your parent needs to pass a credit check first in order to qualify. Your college may suggest your parents take out a loan regardless of whether that is financially feasible or smart for your family. Your college may even factor in the parent PLUS loan into a calculation of how much of the cost of attendance you already have covered, even if your parent can’t or shouldn’t take out this loan. If your college does that, recalculate what you have left to pay excluding the PLUS loan to give yourself a true sense of costs.
Cost of attendance
Your college should give you an estimate of how much it will cost for you to attend their school for a given year, and provide a breakdown of individual costs such as tuition, fees, books, supplies, housing, meal plan, and other specific expenses. Your college’s calculation should factor in your unique situation, including whether you’re an in-state or out-of-state student, whether you’re planning on living on-campus or off, and your grade level. If you don’t see an estimation or it doesn’t seem specific to you, ask the financial aid office for your true cost of attendance.
Net price
The net price is the amount you and your family have left to pay for your education after gift aid. You can calculate it by subtracting your grants and scholarships from the cost of attendance. If you see the net price, but notice that the college has subtracted your optional loans from the cost of attendance as well, add the loans back in to get your true net price. Loans are money you and your family are contributing to your education, not a gift. Getting an accurate net price is important because you’ll use it when you negotiate.
Estimated bill
The estimated bill is the amount that you’ll have to pay directly using work-study earnings, parent PLUS loans, savings, and other money. It’s important to know what to expect so you have everything you need to pay on time and avoid late fees. You can calculate your estimated bill by subtracting your grants, scholarships, and undergraduate loans from your cost of attendance, but make sure to get a number from your college too so you aren’t surprised by the real bill.
What you need to do next
Your college should be explicit about what you need to do after you get your aid offer. Typical steps include accepting your financial aid online, putting down a deposit, or providing any additional information or documentation. Each step should have a deadline that you can add to your calendar.
If you plan to negotiate, do it as soon as you receive all your financial aid offers. A lot of free money is first come, first served, so the earlier you ask, the better chances you have of getting a yes. It also gives the school a chance to give you an answer before you have to have to make a final decision about where to go. You deserve to make an informed choice!