The acceptance letter comes first…then the Financial Aid Award Letter often arrives a few days later. Having served on a scholarship committee the last four years (with the primary responsibility of creating a spreadsheet to compare aid offers), I see first-hand the confusion sowed by these letters.

Now, a study from the Hechinger Report describes the challenges many families have interpreting these documents:

The letters sometimes begin with words such as “Congratulations,” but go on to outline financial aid that consists almost entirely of loans that have to be repaid. Loans are described as “awards.” The letters will list an “expected family contribution” of 0, not accounting for those parent or student loans, which, in fact, eventually require a substantial family contribution.

Work-study money is commonly promised as part of a financial-aid package, even though work-study jobs or earnings can’t be guaranteed. And while that and the total amount of financial aid a university or college is offering might be listed, the cost of attendance often is not, complicating the process of understanding how much families will have to pay.

The letters use technical jargon and abbreviations even families with experience in financial matters are unlikely to understand, such as “Unsub Staff” to refer to unsubsidized Stafford federal loans. One alludes bafflingly to something called “credit-based alternative loans.”

Perhaps, the best advice came from a college sophomore, who still had this process fresh in his mind:

“To me, it’s a marketing tactic,” he said. “Like every other thing, it’s a business. They want you to choose this school. They want you to choose their product and their brand. Is it morally right? That can be questionable.”

Don’t most people understand that these are marketing documents?  Unfortunately, not…

“Students and families don’t necessarily question much,” said Christine Roque, advising manager at uAspire, which also counsels low-income students about how to pay for higher education. “They think, the college must have my best interests in mind, and they don’t necessarily see them as businesses. There’s that sense of trust.”

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Want to give your students some practice?  Here are three sample Aid Award (AidAwardLetters) and some questions that they can answer as they review them:

Analyzing Financial Aid Letter from College

1. What is the amount of family’s expected financial contribution (EFC)?

2. How is EFC determined?

3. What is total cost of attendance (COA) for fall and spring semesters?

4. Does Gift Aid need to be repaid?

5. What is total amount of loans that is recommended by this letter for the fall and spring semesters?

6. What would be your estimate of how much in student loans you would have after four years in college?

7. What are two benefits of having a subsidized loan vs. unsubsidized loan?

8. How is federal work study earned?
9. Which offer is most attractive to you?  Why?

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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