FINANCIAL AID: A Guide to Evaluating a Financial Aid Award Letter

Receiving a Financial Aid Award Letter A Financial Aid Award Letter (FAAL) provides a student with a school’s cost of attendance (COA) as well as the amount of aid available to the student A student typically receives FAAL’s between March and April; a school will not send a student a FAAL until he/she has applied for admission and been accepted The FAAL explains the financial aid package offered and identifies the types and amount of aid a student is eligible to receive from federal, state, and institutional sources A financial aid package is assembled by the school at which a student has been accepted and serves to aid the student with his/her financial need Financial need is determined based on a student’s Expected Family Contribution (EFC), as well as a school’s interest level in that student

What Does a Financial Aid Award Letter Include? FAAL’s will inform the student of how much financial support he/she will receive from a school in the upcoming year Financial support is provided in the form of grants, loans, scholarships, and work-study Grants: Classified as “gift aid” and is not required to be repaid. Grant examples include Federal Pell, Federal Supplemental Educational Opportunity, institutional, and state- sponsored Loans: Loans must be repaid. Loan examples include Federal Perkins, Federal Stafford, Federal PLUS, state loan programs, and private student loans Scholarships: Classified as “gift aid” and is not required to be repaid. Scholarships are provided by a school or private, third-party. FAAL’s should reflect both school-funded and outside scholarships that have been reported to the financial aid office Work-Study: Funds that a student can earn through on or off-campus employment

How to Evaluate a Financial Aid Package To evaluate a financial aid package, a student must analyze both the COA as well as the amount of aid received A student’s Net Price, or out-of-pocket cost, is the difference between the COA and the total gift aid (e.g. grants, scholarships, etc.). This figure represents the amount that a student will need to pay either through personal funds or loans The financial aid package received is based on a one(1) year term. When evaluating a financial aid package, the student should identify the average time it takes to graduate, as well as the average indebtedness of a student upon graduation Total COA$42,000 Total EFC$20,000 Total Financial Aid Need$22,000 Gift Aid Received$15,000 Self-Help Aid Received$7,000 Net Price$27,000

Important Financial Aid Ratios & Terms Grant to Loan Ratio: Identifies the strength of the financial aid package received. A higher ratio means that the student is receiving more grant aid than loan aid. Since grant aid does not have to be repaid, the highest ratio is also the most desirable Self Help to Grant Ratio: Identifies how much of the educational cost the student will be paying through EFC, work-study, and loans. Since grants do not have to be repaid, the lowest ratio is also the most desirable Gapping: Occurs when there is a difference between the EFC and the COA. If “gapped”, the student must evaluate whether or not he/she can obtain the additional funds required to attend the school

Comparing Financial Aid Award Packages School ASchool BSchool C COA$25,000 EFC$5,000 Financial Need$20,000 Grants$5,000$10,000$2,000 Scholarships$5,000 $1,000 Loans$7,500$3,000$12,500 Work-Study$2,500$2,000$1,500 Grant to Loan Ratio Self Help to Grant Ratio Gap$0 $3,000 With the highest Grant to Loan ratio, the lowest Self-Help to Grant ratio, and no Gap, School B represents the strongest package for the student

Q. Did the student receive gift aid or self-help aid? A.Gift aid is educational support that does not need to be repaid. Self-help aid is educational support that is dependent upon a family’s financial need and is required to be repaid. It is better to receive gift aid as compared to self-help aid Q. How are loans structured? A.When a student evaluates a loan package, he/she should consider the following: Interest Rates: With a variable interest loan, the rate and payment will fluctuate with the market. With a fixed interest loan, the rate and payment will remain unchanged Subsidized vs. Unsubsidized: The interest on a subsidized loan will be paid by the government during both the deferment and grace period. The interest on an unsubsidized loan accrues over time and is paid by the borrower once repayment begins Important Financial Aid Award Letter Q&A

What is the estimated increase in COA per year? Does the school typically “front-load” grants? What % of students receive the same amount of financial aid in latter years? Does the school ever meet financial need in year one, and then “gap” the student in future years? Are there minimum GPA requirements, credit requirements, or service requirements to maintain the current financial aid package? How does the school handle outside scholarships? If scholarships reduce the need-based portion of the financial aid package, will it reduce the amount of grant money offered, or will it reduce the loan and grant burden? What are the details of the work-study program? What is the hourly rate? How difficult is it to find a work-study position? Will work be on-campus or off-campus? What is the financial aid appeal process? Questions to Ask the Financial Aid Office

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