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What’s in a Financial Aid Award?

student deciphering financial aid letter on desk

When a college offers you financial aid, it's important to understand exactly what it is offering you — especially before you sign on the proverbial dotted line. Here's how to decipher your financial aid award letter and see just how much it reduces your college cost.

Once a college admits you — and crunches the numbers you provided on your financial aid applications — it will offer you a "financial aid package" (sometimes called an award). In this package are different types of aid intended to meet all or part of your financial need for one academic year. The size and makeup of a financial aid package is, for many students, a major factor in determining which college to choose.

What Should Be In Your Financial Aid Award Letter

Your award letter will list the types and amounts of aid being offered. Aid may be a grant, a scholarship, a loan, work-study — or a combination of these aid types.

The award letter should also include:

  • A breakdown of the college's cost of attendance (COA)
  • Your Student Aid Index (SAI)
  • The amount of your financial need the college is meeting
  • The deadline for accepting the aid offered
  • How and when the money will be disbursed
  • The academic period the award covers
  • The process for accepting or declining aid
  • Any additional documentation needed

Read the Award Letter Carefully

The content of award letters can vary dramatically from college to college. It may not contain all the information listed above. Award letters may use terminology and acronyms that you do not recognize. Before accepting any aid, be sure to ask the financial aid office for missing information and clarification of anything you don't understand.

Identify Aid That Reduces College Costs

Although your aid package may seem to cover most or all of your financial need, not all aid actually reduces your college cost.

  • Gift aid (scholarships and grants) reduces your college cost because you do not need to repay it or work for it. Look for words like "scholarship," "grant," "discount," and "award" in your award letter.
  • Self-help aid (loans and work-study) does not reduce your college cost. Self-help aid simply makes it easier for you to pay for college out of your own pocket. You will need to pay back this money or work for it.

Don't rely on the college to identify gift aid and self-help aid. Do the analysis yourself. In particular, some awards are not easily recognizable as loans. When in doubt, call the financial aid office.

Figure Your "Net Price" to Attend

Your actual cost to attend a college (your net price) is simply the COA minus your gift aid. The resulting number is the dollar amount you will have to cover from other sources. If an award letter provides a net price figure, look at it closely. It may treat loans and work-study as aid that reduces your net price, when in fact these types of aid add to your net price.

Compare Aid Packages

Comparing aid packages from different colleges can be tricky because there is no standard approach to award letters. Here are a few tips that can help.

  • Be sure the COA contains the same elements for each college. The major components are tuition and fees, room and board, books and supplies, local transportation, and personal expenses.  If anything is missing, ask the financial aid office for a full COA breakdown. Ask the financial aid office about additional costs that might not be included in the COA, such as required health insurance, or other campus fees.
  • Identify the gift aid and the self-help aid on each award letter. Then, for each college, separately total up all gift aid and all self-help aid. 
  • Run the numbers for each college. Subtract the gift aid from the college's COA to see your net price. Ultimately, you may not choose the college with the lowest net price or the college that will put you in the least amount of debt, but the information can be invaluable when making your final college decision.

Before You Accept Your Aid Offer

  • Check the loan terms and conditions. Check the interest rate, fees, years to repay, whether the loan is a student or parent obligation and whether interest is subsidized or unsubsidized. Make sure that you or your family can afford to make the payments. For help, visit the Department of Education's Loan Simulator to estimate your future federal loan payments.
  • Find out what happens after the first year. Your aid award is good for only one year. Find out if the college typically offers less gift aid and more loan aid after freshman year. Also, find out if your scholarships are renewable for subsequent years and what the requirements are for renewal.
  • Identify any strings attached. Many scholarships and grants require students to maintain a certain GPA and take a specific number of course credits to remain eligible for the aid.
  • Find out the college's policy on outside scholarships. Your college will require you to report any outside scholarships you win. Some colleges apply the scholarship to any unmet need, some will reduce your loans, and others will reduce your gift aid.

Accepting and Declining Aid

You don't have to accept all of the aid listed in your award letter. For example, you can decline any loans offered. Accept or decline each aid offer as soon as you are comfortable and certainly before the acceptance deadline.

Taking Care of Unmet Financial Need

If your total award does not meet your full financial need, you have options. You may be able to take out a private education loan. Your parents may qualify for a PLUS loan. You can ask the college about staggered payment plans. You can also review your situation with the financial aid office. If your financial circumstances have changed since you filed your FAFSA, the office may be able to adjust your package.


Financial aid award letters can be confusing. Don't try to decipher them alone. Review them with your parents or other adults, such as your high school counselor. If you are unsure about any aspect of your financial aid offer, contact the financial aid office at the college to confirm the award and ask any questions you might have.  

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