The Good, the Bad, and the Ugly of Financial Aid Letters

Award season is upon us and financial aid packages are arriving.

Each letter should have these key components: the full cost of attendance, grants and scholarships, loans, work study, the net amount you will pay after the financial aid is deducted, and your expected family contribution (EFC). Award letters are the deciding factors for many families, but here’s how to evaluate the offers.

The Good

The best part of the award letter is the merit aid. This includes scholarships and grants (both college, state and federal), none of which has to be repaid. State and federal grants are either awarded based on need, or by the states themselves who have set aside grants for their in-state residents. Colleges award this aid to their top applicants, hoping they will accept an offer of admission with promises of rewards for their exceptional application and hard work during high school.

The best way to assure that your award letter is the best it can be is to apply to the best fit colleges. When a college wants you, they will be more inclined to stack that award letter with the best merit aid they can offer.

The Bad

Unless you receive a full-ride four-year scholarship, your award letter might contain some bad components. Colleges often use these tactics when the applicant is not at the top of their applicant pool or to lure new students to accept admission.

“Front-loading” occurs when colleges make their most generous financial aid award offers to applicants as a lure. When students return the following year they may find their school has dropped their previously awarded grants and scholarships. Colleges often neglect to provide the relevant information regarding the requirements to keep your scholarship or award throughout all four years of college. It’s important to know if you will get the same package each year. It’s your responsibility to ask.

Colleges also often do not accurately estimate costs. Be sure that the award letter includes the full cost of attendance, broken down into expenses such as tuition, room and board, textbooks, and even travel. Also check the published cost of tuition against the amount on the award letter. You can use such sites as College Navigator or CollegeData for these prices.

The Ugly

The ugliest components of an award letter can make the difference between accepting an offer of admission or declining it based on the contents of the award.

“Gapping” happens when a college offers you admission but neglects to back it up with a financial aid award. This means that the college doesn’t offer enough aid to cover college costs after your expected family contribution. The difference between what a college is offering in aid and the amount a family can afford to pay can often be tens of thousands of dollars.

Colleges will also stack the award letter with loans, both student and parent, and work study. Never include these in your award comparisons. Just about every family qualifies for a parent loan and students who demonstrate need qualify for federal loans and work study as well. These so-called awards should not be used as a way to meet the family’s EFC.

The lesson for parents and their college-bound students is to carefully scrutinize, analyze and question each item in their financial aid awards. Don’t be fooled by the tactics colleges may use to present a pleasing picture while hiding the truth of the financial package.

[Want more info from the TeenLife Experts? Here's 5 questions to ask the financial aid office.]