Financial aid award letters provide college students with information
about college costs and the types and amount of financial aid
the student will receive. Families rely on the financial aid award
letters to help them understand college costs and compare costs among
different colleges. But financial aid award letters can sometimes be
confusing.
Fastweb surveyed about 580,000 college freshmen and sophomores and
their parents about financial aid award letters, to evaluate the need
to standardize the content and formatting of financial aid award
letters.
Although nearly two-thirds of the respondents said that the financial
aid award letters were clear and easy to understand, more than half
said that the financial aid award letters from different colleges were
difficult to compare.
The letters were inconsistent in their inclusion of college cost
information, with only two-thirds including a cost of attendance
figure and only about two-fifths of those including a detailed
breakdown of the cost of attendance. Very few financial aid award
letters included complete college cost information.
When the financial aid award letters did include detailed cost
information, this information was often inaccurate. Almost
three-quarters of survey respondents said that the transportation cost
figures were not realistic, and nearly two-thirds said that the
textbook costs were not realistic.
More than half of the financial aid award letters lacked an
out-of-pocket cost figure. The out-of-pocket cost is the difference
between the cost of attendance and all grants and scholarships. It
represents the family's bottom line cost of college, the amount of
money they will have to pay from savings, current income and loans.
When loans were listed on the financial aid award letter, they often
included just the loan amount and not basic cost information such as
the interest rate, loan term, monthly payment, total payments and
total interest.
It's no wonder that almost seven-eighths of the students and parents
said that financial aid award letters should be standardized to make
them easier to understand and to compare.
There are a few basic tips on comparing financial aid award
letters.
1. Obtain detailed cost of attendance information, including separate
figures for tuition and fees, room and board, books and supplies,
transportation and personal expenses. If these figures do not
appear in the financial aid award letter, you should be able to
find them in the college's catalog or on its web site.
2. Make sure that the cost figures are realistic. If you will be
commuting, the transportation figures should be based on the
distance from home to school, the IRS mileage rate and the cost of
parking on campus. If you will be living on campus, assume the cost
of two trips home. Use the same textbook cost figures for all
colleges.
3. Clearly identify the type of aid for each source of aid. Is it
loan, grant, scholarship, work-study or student employment?
4. Calculate the out-of-pocket cost yourself. Some colleges may
present a net cost figure, which subtracts all aid from the cost of
attendance instead of just grants and scholarships, instead of an
out-of-pocket cost figure. Other colleges will use loans to satisfy
unmet need.
5. Compare colleges based on the out-of-pocket cost. If the difference in
out-of-pocket cost is less than $1,000, it should not affect your
choice of college. But if it is more than $5,000, you should
consider the out-of-pocket cost along with other criteria for
choosing a college. Higher out-of-pocket costs lead to more debt at
graduation and increase the chances you'll borrow too much to pay
for your college education. Education debt has an impact on
your career choices and lifestyle after graduation.
FinAid has two tools for comparing financial aid award letters,
a simple award letter comparison tool
and an
advanced award letter comparison tool.
FinAid also has a helpful
Guide to Financial Aid Award Letters.
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