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How Colleges Award Financial Aid

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The arrival of a financial aid award letter can be a big deal—almost as big a deal as a college decision letter. Here's how colleges put together those anxiously awaited aid packages.

When it comes to choosing a college, "affordable" is an important quality to just about everyone. The amounts and types of aid colleges award can greatly impact your ultimate college cost—and your ultimate college choice.

First, Colleges Figure Your Family's Contribution

When colleges figure your financial aid, they consider several factors. One factor is your Expected Family Contribution (EFC). Your EFC is what colleges expect you and your parents to pay for college. All colleges use an EFC calculated by the government based on information from your Free Application for Federal Student Aid (FAFSA).

Some private colleges use an additional EFC calculation derived from the CSS/Financial Aid Profile form. The CSS formula considers more factors, such as home equity and income from stepparents and noncustodial parents. Colleges use the Profile to determine aid awards from the college's own resources.

Next, Colleges Figure How Much Aid You Need

Colleges also consider the cost of attendance (COA), which is an estimate of the cost to attend that college for one year. The COA should include tuition, fees, books, supplies, housing, meals, local transportation, and miscellaneous personal and educational expenses. The college subtracts your EFC from the COA to calculate the amount of your financial need.

They Look at Aid Based on Your Need

Colleges then consider different types of aid to meet your financial need. The options boil down to gift aid (scholarships and grants) and self-help aid (student loans and work-study earnings). Since you have to repay loans and you have to work to earn work-study awards, gift aid (which you do not have to repay) is always more desirable. Only gift aid reduces the net price of a college, which is the amount you and your family actually pay out of pocket.

They Look at Aid Based on Your "Merit"

Many colleges offer a type of gift aid called merit aid, which they award based on the value a student brings to the college. Colleges offer it to attract students whose grades are at the top of the application pool, or who have a talent or other quality the college seeks. If you receive merit aid, it will count toward meeting your financial need, just like any form of financial aid.

Then They Build Your Aid Package According to Their Policies

Colleges combine the different types of gift aid and self-help aid when they create aid packages. Each college allocates aid differently, however, according to its policies. Below are a few examples of how such policies can affect your ultimate college net price.

  • Some colleges leave a "gap" of unmet need. A family will have to cover this gap along with its EFC. This practice allows a college to use its limited aid resources to provide aid to a larger group of students and to award more gift aid to students it wants to enroll. Some of the most selective colleges meet 100% of a student’s demonstrated financial need. (You can see the policy used by your colleges on CollegeData. See the Financials section of any college’s College Profile
  • Some colleges use aid to encourage students to commit. According to the Association of Certified College Funding Specialists, some colleges use a strategy called "preferential packaging," desirable students may get aid offers that fully meet their need, with a high proportion of grants and scholarships. Other students may get loan-heavy packages and less of their need met.
  • Some colleges award loans and work-study first, then gift aid. Other colleges award grants and scholarships before loans and work-study aid, in an attempt to keep loans to a minimum.
  • Many colleges award more gift aid to students who file early and meet financial aid filing deadlines. According to, some colleges award scholarships and grants (gift aid) on a first-come, first-served basis. Students who file for aid later in the admission cycle, risk receiving more loans in their aid package.
  • The college’s outside scholarship policy can affect your package. By law, colleges are required to reduce your financial need by the amount of any college money that you receive from scholarship sources outside the college. Some colleges will reduce gift aid first. Others will reduce gift aid only after all self-help aid has been subtracted. (See How Outside Scholarships Affect Financial Aid Awards for more details.

Most colleges are open about how they award and package financial aid to students. You can learn more about the policies at specific colleges by visiting their financial aid office websites, or calling the financial aid office.  

If an Aid Package Falls Short

If you are disappointed with your aid offer, you and your parents can appeal to the college. For example, you can ask for a recalculation based on information the officers don't have. A parent may have lost a job or entered information incorrectly on the aid application. All colleges have an appeal process—you just need to ask.

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