Imagine you were buying a car and paying for it involved five categories, and each of those categories was called something different at the three dealerships you were considering for your purchase.
You’d have to spend a bit of time talking to each dealership and clarifying the terms and categories before you’d have any hope of comparing offers.
That’s essentially what Leslie Lilla, a Las Vegas mom who works in the hospitality field, had to do when she got the financial aid award letters from colleges.
Each school had the same aid categories categorized differently as well as different rules for the GPA required to keep merit scholarships.
All Leslie wanted to know was how much the bill was going to be, so she could figure out what she had to borrow. She also lost one of her two jobs recently and needed to write financial aid appeal letters – which you can’t write without knowing what aid you were given to begin with.
To make it clearer as to what your financial aid letter really means, you need to be comparing apples to apples.
We’ve found the best way to do this is to divide the information into four areas: money your student (and/or you) don’t need to repay, money your family needs to pay, money your student can borrow from the government, and money your student can earn.
You can write down the numbers on a sheet of paper or download our Compare College Offers google sheet.
Beyond filling in the categories, you will need to take notes on answers you get when calling the financial aid office.
For instance, you need to jot down the details of when a student could lose the award if financial need drops or the GPA recruitment for the Merit Scholarship.
When one school requires maintaining a 2.0 and another requires maintaining a 3.5, your child is safer in regards to maintaining the scholarship with the one only requiring a 2.0 GPA.
Below is an actual financial aid award letter a member of our Paying For College 101 Facebook group received.
Looking at the “awards”, it’s not clear which money is being awarded based on need vs. merit. There is also no mention of any requirements to make sure these awards are renewable, if they are at all.
In addition, it’s important to understand what costs and fees are included in the cost of attendance quoted in your letter. The cost of attendance in the sample letter below does not include “indirect costs”, like travel, books, supplies, insurance, and personal expenses.
Some schools include indirect and direct costs in their cost of attendance, so it’s important to ask what’s included in the numbers and what’s not!
Here’s what you need to know about each category when comparing information from financial aid award letters:
Money You Don’t Need to Repay
All your grants, scholarships, etc. go in this category. This category should be divided into two: money from the school and money that’s more independent. After all, your student can use a private scholarship anywhere.
We divided scholarships and grants into what is need based and merit based. The reason why is both can change as to whether they are awarded based on individual scholarship or grant recruitments. A financial need-based scholarship or grant could disappear if your income increases.
A Merit Scholarship could require your child to maintain anywhere from a 2.0 to a 3.5 GPA to keep it. Leslie had to sort through pages of paperwork to find the GPA recruitment for her daughter to keep her merit award. It ended up being just 2.75.
Money Your Family Needs to Pay
This is probably the most important number. When Leslie received the financial aid award letters for her daughter, she wanted to know what her final bill would be. One school subtracted parent PLUS loans in the calculation. Another school didn’t.
The school that didn’t include parent PLUS loans in the financial aid package gave her a better estimate of what the family will have to pay. Then, families can decide whether they want parent or private student loans to finance their student’s education. They can also decide if they want to appeal to get more financial aid or consider a cheaper school or one offering more financial aid.
If you’ll be considering loans beyond the loans your student can borrow from the government, make sure to research several lenders and compare their offerings. A good place to start is looking at what College Ave Student Loans has to offer.
Depending on your credit, you may find the interest rate and multiple repayment options from a private lender, like College Ave Student Loans, to be more attractive than what you’ll have to pay with parent PLUS loans. Just remember, all loans will need to be repaid and make sure you have a clear understanding of who is responsible for repaying the loan (you or the student).
Money Your Student Can Borrow From the Government
In this category are unsubsidized and subsidized loans. These are the loans that have reasonable limits and are issued directly to students. They also have low fixed rates that are hard to beat in the private marketplace.
It’s important to exhaust federal student loans first, before borrowing from other lenders. This is because subsidized student loans do not accrue interest while the student it in school. During this time, the interest on subsidized loans are paid by the government.
After federal student loans issued directly to students are exhausted, parents can decide whether they want to see what they can afford from their own income and savings, borrow parent PLUS loans from the government, or borrow private student loans. (Or find a school where they don’t have to borrow at all or borrow .)
It’s worthwhile to use an online student loan calculator, like College Ave Student Loans’, to fool around with variables like monthly payment amounts, years to pay back, and fixed vs. variable interest rates.
Using student loan calculators will also help you understand how much interest you’ll have to pay over the life of the loan and the total cost of the loan. With this type of information, you’ll be able to make a more informed decision about how much you or your student should borrow.
Money Your Student Can Earn
This category reflects money the school mentions for work study and is the maximum amount your student could earn. This is an option, but so are on- and off-campus jobs that could pay more.
Your student should review all options for employment, including internships that can help with their career after college.
After chatting with Leslie, she finally knew what her real bill was. She also dug deep into paperwork to find out what the rules were on the merit scholarships awarded.
She wished she had the information before writing appeals, as having a full understanding of what financial aid you are awarded can make a big difference in knowing what you are actually appealing and increase the chances for getting aid packages increased.
Bottom line, pay attention to all the information in your student’s financial aid award letters. Don’t take anything at face value, make sure you understand what is being offered and don’t be afraid to call the school’s financial aid office with questions.
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