Understanding Your Financial Aid Award Letter

It starts with filling out the FAFSA

A financial aid award letter explains the total amount of monetary assistance that a school will offer you to offset its costs. You’ll receive these letters shortly after you get your college acceptance letters. Here’s a quick look at financial aid award letters and how to read them.

Key Takeaways

  • The Free Application for Federal Student Aid (FAFSA) is the online form that you need to submit to get any federal financial aid.
  • Financial aid award letters detail how much financial assistance a school offers you.
  • There are four main types of financial aid: grants, scholarships, work-study programs, and loans.

What Is Financial Aid?

The average cost of tuition and fees among ranked universities for the 2021 to 2022 school year was $43,775 at private colleges, $11,631 for in-state students at public colleges, and $28,238 for out-of-state students at state schools. For many families, these costs would be an insurmountable problem without student aid, student loans, or both.

Financial aid is money that helps you pay for college or a career school. It can come in the form of grants, scholarships, work-study programs, and loans.


If you’re starting to think about college, then you’ve probably come across the acronym FAFSA. It stands for Free Application for Federal Student Aid—a form that you need to fill out to get any federal financial aid. Many states and colleges also use the FAFSA to determine whether you’ll get financial aid—and if so, how much.

How to Apply for Financial Aid

To be considered for federal financial aid, you must submit a completed FAFSA. Keep in mind that most states, colleges, and universities also use the FAFSA to award other types of financial aid. That means you may need a FAFSA not just for federal aid but also for state- and college-sponsored financial aid.

There are three ways to fill out and submit the FAFSA:

  1. Use the online application from the U.S. Department of Education.
  2. Use the myStudentAid app (available on iTunes and Google Play).
  3. Print, fill out, and mail the FAFSA to the address on the form.

In addition to filling out the form, you need to provide signatures from yourself and a parent (if applicable). You can do this electronically; by printing, filling out, and mailing a signature page; or by signing the paper form if you mail in your application.

When you fill out the FAFSA, you’ll answer questions about your family’s finances, including information from tax returns. As the name suggests, the FAFSA is free. That’s a good thing because you need to submit a new FAFSA for each academic year that you are in school. For example, if you plan to attend four years of college, then you’ll need to fill out four FAFSAs—one for each year.

When Is the FAFSA Due?

FAFSA forms are usually due by June 30 of the current academic year. For example, for the 2021 to 2022 school year, you can file a FAFSA up until June 30, 2022. Note that some college and state grant programs have their own FAFSA deadline, which can be as early as February 1. Be sure to check the dates.

Some states and colleges award their financial aid funds on a first-come, first-served basis until all funds have been awarded. To avoid missing out on any opportunities, it’s a good idea to submit your FAFSA as soon as possible after Oct. 1 each year when you plan to apply for financial aid.

According to Edvisors.com, students who file the FAFSA early generally receive twice as much grant funding as students who file later.

How Does Financial Aid Work?

After you submit your FAFSA—and depending on whether you qualify for aid based on the information you provide—you’ll receive a financial aid award letter from each school that you list on it. Each letter explains the federal and nonfederal financial aid options that the school is offering you.

You’re not obligated to accept the aid that is offered in your award package. You can compare your offers from different schools before you decide.

Whether you accept or decline an offer, you need to respond to the school to let it know your decision. Be sure to check each school’s deadline so that you reply on time.

What Is a Financial Aid Award Letter?

If you submitted a FAFSA and were approved for financial aid, then each school that accepted you will send you a financial aid award letter. Though there’s no standard format for these letters, each explains how much financial assistance the school is offering you. You’ll receive the letter electronically or via regular mail (or both).

In general, each financial aid award letter explains:

  • The cost of attendance (COA). Your COA is an estimate of what you will pay for one year of school, including tuition and fees, room and board, books and supplies, and transportation.
  • Your expected family contribution (EFC). The EFC is a number the school uses to determine how much financial aid you’re eligible to receive. In general, the lower the EFC, the more funding you can get.
  • Details (and dollar amounts). These pertain to whatever grants, scholarships, work-study programs, and loans the school is offering you.

In mid-2023, the expected family contribution (EFC) will become the Student Aid Index (SAI). This is to clarify its meaning because the EFC doesn't actually reflect how much the student must pay the college. The school uses it to calculate how much student aid the applicant is eligible to receive.

Types of Financial Aid

Your financial aid award letters may contain different types of financial aid offers. Though each school may have its own nomenclature, there are four general types of aid:

  • Grants. You don’t have to repay grants. Most grants are need-based, meaning that they’re typically awarded based on your family’s financial situation.
  • Scholarships. Like grants, you don’t have to repay scholarships. Most scholarships are merit based, which means that they’re based on your talents and interests (e.g., academic, athletic, artistic).
  • Work-study jobs. Work-study programs help you earn money to pay for college. You’ll work part time on or off-campus while enrolled as a student. You’ll earn at least minimum wage but may earn more depending on the job and your qualifications.
  • Loans. A loan is money that you borrow and pay back with interest. Loans can come from the federal government or from private sources, such as banks, credit unions, and state-based organizations. Federal student loans are generally less expensive than private student loans.

Without a doubt, grants and scholarships are the best type of aid to receive because you don’t have to pay them back. When you compare your options, pay attention to the type of aid that each school is offering—not just the amount—and whether you’ll be on the hook for any student loans.

When Will I Get My Financial Aid Award Letter?

Schools typically send out financial aid award letters close to when they send their acceptance letters. If you have questions about the timing, reach out to the school’s financial aid office.

How to Compare Financial Aid Awards

For many students, financial aid award letters help to narrow down college choices. To find out which school will be the most affordable, you can compare costs with a bit of number crunching. To do so, follow these steps for each award package that you receive:

  1. Calculate the total COA. This may be included in your financial aid award letter. Otherwise, add up the tuition and fees, room and board, and estimated costs for books, supplies, transportation, and personal expenses.
  2. Subtract the total amount of money that you’ll get for free. This includes any federal Pell grants, state and institutional grants, scholarships, and military education benefits.
  3. Subtract the total amount of money that you’ll earn through work-study programs.
  4. Subtract the money that you plan to borrow from various loans.
  5. The amount left over is the amount that you’ll need to come up with to attend that school. You can use savings, other scholarships, gifts from friends and family, and private loans to fill the gap.

Then compare the results for all the schools that you’re considering. Whenever possible, take advantage of the free aid and work-study programs first, then take out loans only if needed.

If you do need a loan to help cover costs, keep in mind that federal student loans are generally more flexible and less expensive than private loans. Remember that a bigger financial aid package consisting primarily of loans isn’t necessarily better than a smaller total award offering more scholarships and grants.

If you didn’t get the amount of aid that you anticipated from a school, then you might want to send a financial aid appeal letter, in hopes of seeking a professional judgment—the authority of a school’s financial aid administrator to make adjustments to the data elements on the FAFSA. Situations in which an appeal letter may be appropriate include:

  • Your family finances have changed since you submitted your FAFSA.
  • You made a mistake on your FAFSA that could impact your award.
  • You received a better offer from another school that you want this school to match.

If you decide to appeal, then it’s best to do so as soon as possible before the school’s financial aid funds run out. Start by contacting the school to inquire about its aid award appeals process. No matter what that process is, follow the directions, be specific, and always be nice.

Financial Aid Letter FAQs

Do I Have to Repay Financial Aid?

It depends on the type of aid you received. If the financial aid was in the form of a loan, you will need to repay the money. Any grants, scholarships, or work-study program payments do not have to be repaid.

What Terms Should I Know?

Get to know the jargon and language used in offer letters. A report from New America and uAspire found 136 unique terms for unsubsidized loans. Two dozen terms didn't even use the word "loan" in the letter. The report, which analyzed 515 letters, found that more than a third did not contain any cost information about the financial aid offer.

Does Credit Card Debt Mean I Can Get More Aid?

Probably not. Generally, more debt does not increase the amount of financial aid you'll be awarded, according to Mark Kantrowitz, a financial aid expert. In fact, it could even lower your eligibility for need-based financial aid.

The Bottom Line

If you apply for financial aid, you’ll start receiving financial aid award letters shortly after your acceptance letters show up. The amount of financial aid that schools offer can play a big role in where you’ll spend your college years.

Still, it’s also important to consider other factors, such as each school’s location, campus life, academic programs, and graduation rate. You’ll be spending four or more years of your life in college, so take the time now to choose the school that will work best for you.

Article Sources
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