Comparing the price of one product with another often takes seconds. But with higher education – likely one of the biggest purchases you will ever make – parsing the true value of college financial aid offers can make you want to tear your hair out. You should be able to use a college's financial aid letter to help you choose which school makes the most sense, but the language is often anything but clear. Understanding what the letter really says – and what questions to ask – is critical.

Students have a little extra time to pore over the document this year due to recent changes in the Free Application for Federal Student Aid (FAFSA) filing deadline, allowing schools to send out letters a few weeks earlier than usual. But the deadline for accepting aid – May 1 at most schools – is quickly approaching, so it’s worth taking another look at the letter if you haven’t responded yet. (For more, see Types of Financial Aid and College Loans.)

Asking the Right Questions About College Financial Aid Letters

Once you’ve been accepted, schools take financial information from your FAFSA to determine your expected family contribution (EFC). They’ll subtract that number from the cost of attending the institution to figure out how much aid you’ll need.

The financial aid letter lays out the college's offer to help you fill in the gap. In many cases the package includes some combination of federal, state and institutional sources. It may consist of loans, grants, scholarships and even work-study opportunities that give you the opportunity to earn money through part-time employment.

When reviewing the letter, here are some of the basic things you’ll want to consider:

  • What’s the actual cost of attending the college? Some financial aid letters will include this; others won’t. Keep in mind that tuition is just one part of the price. You also need to factor in the costs for room and board, books, fees and – if you’re commuting – transportation. Fortunately, you can get a quick glimpse of all of those by visiting the National Center for Education Statistics College Navigator.
  • How much free money is it providing? Not all types of assistance are equal. Loans can help you in the short run, but they have to be paid back after you graduate. And work-study funds have to be earned through a campus job. Grants and scholarships are the gold standard of aid because they don’t have to be paid back.
  • Is the aid renewable each year? Think of a college education in terms of the four-year cost (assuming you’re enrolled in a four-year program). A generous aid offering in year one is great, but it’ll lose its luster if your grants and scholarships aren’t renewable in subsequent years. Make sure you check this with the financial aid department before making a final decision.
  • What’s the policy about “displacement” of outside aid? Say the university offers you a $5,000 scholarship, and you’ve also been offered a separate $3,000 award through a private foundation. At some schools that $3,000 will displace the amount they’re offering. So instead of giving you $5,000, they will only give you $2,000. Unfortunately, some students find this out the hard way, so be sure to clarify the institution’s policy ahead of time.

Appealing the Offer

Many students don’t realize that the initial aid offer isn’t always written in stone. There are certain cases in which you may be able to petition the school for a more generous one.

The most common method is to file what’s known as a “special circumstances” appeal. You may qualify if your family’s income has changed substantially since you filed for financial aid. The college may also amend its package if you’ve recently undergone a financial hardship – for example, if your parents have filed for divorce or you’ve accrued steep medical bills that your insurance carrier won’t cover.

Alternatively, you may be able to submit a “competitive appeal” if the college of your choice offers less financial aid than other places to which you’ve applied. You’ll have to show your favored institution your award letters from other schools and ask whether it can boost its package to make the offer comparable.

It’s important to have realistic expectations about competitive appeals. Not all schools accept them, even when their aid package lags behind that of other schools. And remember that the appeals process takes time, so if you decide to proceed down that path, it’s best to start as early as possible.

The Bottom Line

Choosing the right college is one of the most important decisions you’ll make, as millions of loan-burdened graduates can attest. By educating yourself about the ins and outs of financial aid, you’re putting yourself in a position to make the best financial decision over the long haul. (For more, see 5 Ways to Get Maximum Student Financial Aid.)

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