How To Read Your Financial Aid Award Letter

Congratulations, you completed your FAFSA®! 

By now, you’ve likely received your reward letter and are trying to understand what you’ve been offered. An award letter outlines the amount of aid you’ve qualified for, including scholarships, grants, work-study, and available federal student loans. 

At first glance, your award letter might not make a lot of sense. From your Cost of Attendance (includes tuition, books, room and board, and other expenses directly related to your education) to your Expected Family Contribution, knowing how much financial aid you’re getting and how much you’re expected to pay can be confusing. 

Since your financial aid package is a huge factor in whether or not you attend a specific school, understanding this letter is essential. Armed with the right knowledge, you’ll know what aid you need to accept or decline, and whether or not you should consider filing for an aid appeal. 

Let’s start from the beginning.

Your Award Letter — Step by Step

Below is an example of a standard award letter. Keep in mind that each school has its own format and vocabulary around work-study programs and loans. If you have any confusion about what type of aid you’re being offered be sure to contact your financial aid office.

With the above sample letter in mind, lets walk through what each one of the sections mean.

Cost of Attendance 

The top of your award letter will likely have information regarding the school that’s offering you aid (in this case XYZ University) as well as your Cost of Attendance.

As we mentioned before, your cost of attendance includes all the expenses related to your education. Though beware, sometimes schools will not include things like room and board or books, so it’s important to get clarification around this if they don’t list exactly what the cost covers.

In our sample letter the Cost of Attendance is $56,000. With that in mind, you can now begin to estimate how much your aid will cover for the given school year.

Eligibility Factors – Factors impacting the size of your aid award

Another section on your award letter will be your eligibility. This will breakdown some of the information the school received via your FAFSA® application.

Take a look at this information and ensure that it’s all accurate. This area can directly affect your financial aid. If something is inaccurate, contact the financial aid department as soon as possible to alert them of the changes. 

Financial Aid Award

Now comes the good stuff. The financial aid award is where the school will outline all the financial aid you’re being offered. This is the section that can be most confusing, so read through it carefully. 

You’ll see a list of everything from your Gift Aid (free money like Grants and Scholarships) to eligibility for things like loans and work-study programs. This section will likely show the total amount you’re being awarded as well as the itemized amount for each piece of aid.

In this example, you can see that the total amount awarded is $51,510 which includes:

  • $45,010 in grants (Gift Aid)
  • $1500 in work-study
  • $5000 in loans

If you’re unsure if something is considered gift aid or a loan, ask the schools financial aid office. 

Now that you know how your award letter is broken down, let’s get a better understanding of what that means for you. 

Outside Resources

If you’ve made your school aware that you’ve been awarded additional scholarships or award money, this section will include those. Keep in mind that the school likely does not have anything to do with these awards, so to get any questions answered you will have to reach out to the organization that awarded them to you.

If these additional awards are not considered loans or work-study, you can factor them into your overall gift aid. 

Your Gift Aid Simplified

Not all financial aid offers are equal, even though your Expected Family Contribution score is the same for all schools, each school determines your award based on their criteria.

Calculating Your Net Price

To better understand your offer you need to know the Net Price of your education. Your Net price is the Cost of Attendance minus the Gift Aid (which is all the free money you’re offered). It’s the amount you’ll need to cover out of pocket or with additional loans and work-study programs.

See the image below for a quick look at the equation using information from the sample award letter.

It might be the case that your Gift Aid isn’t enough to cover your costs, and you want to know what your entire financial aid package, including loans, will cover. That’s called your Net Cost

Calculating Your Net Cost

To calculate your Net Cost, you’ll take your Cost of Attendance and subtract all of your financial aid. That number is your Net Cost should you decide to participate in any work-study programs or take out additional loans. 

As you can see, knowing your Net Price results in a more accurate estimate of how much you and your family are ultimately responsible for (either through loans or up-front payments).

Compare Your Aid Award Packages

Now that you know your Net Price, you can better understand your financial aid award. If you’ve been accepted to more than one college or university, this is a great way to see which one is offering you the best package. 

How do you know which one is the best offer?

Write down your Net Price on each aid award letter you receive. If a school offers you less financial aid than your determined financial need, that’s called gapping. That means their financial aid offer will likely not be enough to cover your expenses without further financial assistance via loans, work-study, or other forms of payment.

If you find that the school you most wanted to attend doesn’t offer a competitive package, you may be able to file an aid appeal to see if they’ll match an offer from another school. This is something you’ll want to do quickly, as it can take some time and financial aid is awarded on a first come, first serve basis. 

Beware: Some schools will omit necessities such as room and board from their Cost of Attendance to make your offer look better than it really is. Make sure the Cost of Attendance includes everything.

Things To Watch Out For

Sometimes these letters can be even more confusing than the FAFSA® application was in the first place. Here are some things to be aware of as you read through your award letter.

No clear separation between loans and free aid

Your award letter might lump in loans with regular aid: Sometimes it’s really hard to know where gift aid (free money) ends and student loans (that you have to pay back) begin. Keep your eyes peeled for which ones are loans and which ones aren’t — and before you consider any loans, think about whether it makes sense for your future.

You might be automatically opted in to loans

It is possible that if you don’t outright reject loans (by literally crossing them out) you may be given them anyway. Search your letter for how you’re supposed to accept or decline your aid offers.

Confusing language around loans and work-study

Beware of any language or labeling you don’t understand: sometimes “loans” are called “self-help.” Work-study is also considered “self-help” even though it’s definitely not a loan. Some schools use different language altogether.

As you can see, there’s a reason that award packages are so confusing. Although the Department of Education wants to standardize these letters, this hasn’t been rolled out yet. 

Once you’ve got it all figured out, it’s time to accept, decline, or appeal your offer. 

Appealing Your Aid Award

Because the FAFSA® uses financial information from two years ago, it’s more than likely that you or your family experienced a change in circumstances that could get you more aid. In that case, you may be able to appeal your aid award. To find out more read our comprehensive guide here

Now that you understand how to read your award letter, you’re armed with the information to make the best financial decision for you. Don’t forget, if you experience any confusion or have questions, reach out to your financial advisor or the financial aid department for clarification.

And congrats, you’re one step closer to achieving your goal of higher education!