Financial Aid Award Letter: What It Is and How to Read It

Written by Jennifer Calonia

August 25, 2020August 25, 2020Paying for CollegeBig Money Decisions, Featured, Student Loan Repayment, Student Loans1385Jennifer Calonia

Edited by Rebecca McCracken
Xiomara Martinez White

Updated on August 25, 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by any of our network partners.

We’ve got your back! Student Loan Hero is a completely free website 100% focused on helping student loan borrowers get the answers they need. Read more

How do we make money? It’s actually pretty simple. If you choose to check out and become a customer of any of the loan providers featured on our site, we get compensated for sending you their way. This helps pay for our amazing staff of writers (many of which are paying back student loans of their own!).

Bottom line: We’re here for you. So please learn all you can, email us with any questions, and feel free to visit or not visit any of the loan providers on our site. Read less

As you receive your financial aid award letters, you’ll notice that schools don’t use a universal award letter template. The various letter formats can be interpreted differently, making it harder to compare financial aid offers between the schools you’re considering.

But despite the visual differences you’ll encounter, a few similarities are consistent across any financial aid award letter. Let’s look at the following topics surrounding your financial aid award.

What is a financial aid award letter?
What information does a financial aid award letter contain?
How to read your financial aid award letter
How to compare your award letters
Financial aid award letter FAQ

What is a financial aid award letter?

A financial aid award letter explains how much monetary assistance a school is offering you for the upcoming academic school year. It goes by a few other names, like a merit letter, school aid offer, financial aid package — or simply, an award letter.

In this letter, you’ll find detailed information, like a breakdown of the types of financial aid you’ve been offered and their respective award amounts. The financial award letter should make expectations clear about attendance costs, your net financial need and other aid offered by the federal government, state or school.

What information does a financial aid award letter contain?

Estimated cost of attendance (COA): The COA is an itemized list of school-related expenses that you might spend over the academic year. Some schools include everything from tuition and mandatory fees to room-and-board and textbooks, while others may not.
Expected Family Contribution (EFC): Your EFC helps your school identify how much financial aid you’re eligible for. This number is based on a federally established formula, which takes your family’s income, assets, benefits and family size into account. If you also have other family members attending college in the same year, this may also affect your EFC.
Aid that needs to be repaid: The financial aid award letter lists any aid offered by your school that needs to be paid back after a predetermined time — for example, direct subsidized or unsubsidized federal student loans. Some loans are need-based, while others do not require financial need.
Aid that doesn’t need to be repaid: You might also see other aid offers that generally wouldn’t need to be repaid (except in specific circumstances). Like loans, these aid types are itemized on the aid award letter with the amounts being offered. This can include grants, scholarships or work-study programs, which may be offered at the federal or state level or through your school.
Remaining balance: The remaining balance that’s on your financial award letter — after grants, scholarships, work-study, and loans — is the amount that you or your family will need to pay out-of-pocket as cash or through private student loans.

Financial aid award letter samples

A financial aid award letter might look visually different, depending on the school that issues it. Below is a financial aid award letter sample from Whitman College:
Image: Whitman College

How to read your financial aid award letter

Some schools clearly show your total financial need on your aid award letter. If your letter doesn’t show this number, use this simple formula to calculate it:

COA – EFC = Financial need

Take the cost of attendance that’s shown on your financial aid award letter and subtract the EFC that your school determined for your financial aid package. This result is your financial need; your need-based aid award can’t exceed this number.

With this information, you can then calculate your unmet financial need, which is the amount of financial gap you’ll have to pay, after grants, scholarships, loans and work-study aid. Calculate this number by using the following formula:

Financial need – Financial aid = Unmet need

Below are a few hypothetical examples to illustrate what the numbers could look like, based on your school’s COA, your EFC, and financial aid.

	College A	College B	College C
Cost of attendance (COA)	$9,500	$15,000	$21,250
Estimated Family Contribution (EFC)	$7,000	$5,000	$11,000
Financial need	$2,500	$10,000	$10,250
Financial aid	$500	$9,200	$10,250
Unmet need	$2,000	$800	$0

How to compare your award letters

With different schools handling the award letter in different ways, you’ll want to be careful when measuring your offers against each other.

Our aid award letter comparison tool is a great place to start — just enter the relevant information along with the name of each school and compare up to three letters at a time. Beyond that, take a look at our guide to deciding which financial aid award offer is best for you.

Meanwhile, consider some of the following moves when comparing financial aid award letters:

Identify all types of aid, so you understand what’s available.
Examine what’s missing (cost of attendance, etc.)
Assess items under the COA that don’t apply to you (e.g. room and board).
Enter all multiple aid award letters into your own spreadsheet, so you’re comparing your offers in an “apples-to-apples” format.

Questions to ask about your financial aid award letter

Scholarships and grants

Does my scholarship renew yearly?
Does my scholarship renew at the same amount each year?
What are the requirements I need to meet to renew my scholarship?
In what circumstances would my scholarship benefits expire?
What can I use my grant or scholarship funds toward?

Student loans

What interest rate will I owe on my loans?
When do I need to start making payments?
Which loans offer subsidized interest?
What benefits does the student loan offer?

Work-study

How many hours a week will I need to work?
What are the weekly hours caps associated with the program?
Can I get a job on campus or off campus?
Will the school match me with a work-study employer?

Miscellaneous

Can my awards change if other students turn down aid?
How common are yearly tuition increases at the college I’m considering?
Have I recently had an extenuating circumstance occur that would affect my EFC and/or financial need?

Financial aid award letter FAQ

When will I get my financial aid award letter?

Generally, schools send newly enrolled students their financial aid award letter about the same time as their acceptance offer letters. However, the timeline may vary depending on factors including when you submitted your FAFSA and how many financial aid applications the school needs to review. Before every academic year, you’ll receive a new award letter to review.

When do I need to respond to my financial aid award letter?

The financial award letter will indicate the next steps to respond to the award and any deadlines that apply. Make sure to refer to the instructions carefully, and if a due date isn’t clear on the letter, contact your school’s financial aid office to clarify its deadlines.

Should I reject any loan money in my financial aid award letter?

Accepting a loan offer on your financial aid award letter depends on your personal financial situation. It’s best to prioritize aid that doesn’t need to be repaid, before resorting to loans. You can choose to accept the entire loan amount, accept a lower amount or reject it.

What are some common problems encountered on financial aid award letters?

Common challenges students and their families encounter on aid award letters include the different template formats used across schools, which makes it hard to compare award offers. Unclear abbreviations and remaining unmet financial need distinctions can also be problematic.

What are my options if I need additional financial aid?

If you need additional financial aid, a private student loan can be used to fill the financial gap. You can also talk to your family about other financial options, like personal savings or working a part-time job (not work-study) to help cover college expenses. You (or your parent, if you’re a dependent) can also write a financial aid appeal letter to your school.

What is a financial aid appeal letter?

A financial aid appeal letter is a letter written by you or a parent to your school’s financial aid administrators asking them to reconsider your financial aid award. The student, or parent of a dependent student, can share extenuating circumstances that the school might not be aware of and request that it reevaluate the award amounts.

Rebecca Safier contributed to this report.

Need a student loan?

Here are our top student loan lenders of 2022!

Lender	Variable APR	Eligibility
	0.94% – 12.99%¹	Undergraduate Graduate	Visit College Ave
	2.00% – 12.35%^*,2	Undergraduate Graduate	Visit SallieMae
	0.94% – 11.44%³	Undergraduate Graduate	Visit Earnest
	0.98% – 11.90%⁴	Undergraduate Graduate	Visit Ascent
	1.69% – 11.98%⁵	Undergraduate Graduate	Visit SoFi
	1.86% – 9.39%⁶	Undergraduate Graduate	VISIT CITIZENS
	N/A⁷	Undergraduate Graduate	Visit FundingU
	0.00% – 23.00%⁸	Undergraduate Graduate	Visit Edly
^* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers. ¹ Important Disclosures for College Ave. CollegeAve Disclosures College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation. This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. This informational repayment example uses typical loan terms for a first year graduate student borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.10% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $141.66 while in the repayment period, for a total amount of payments of $16,699.21. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 7/1/2022. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term. ² Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply. ³ Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest. Earnest Disclosures Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.49% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.19% APR to 10.14% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. ⁴ Important Disclosures for Ascent. Ascent Disclosures Ascent loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: AscentFunding.com/Ts&Cs Rates are effective as of 07/01/2022 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes income-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions, please visit AscentFunding.com/Cashback. Cosigned Credit-Based Loan student borrowers must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs are available for the most creditworthy applicants and may require a cosigner. ⁵ Important Disclosures for SoFi. Sofi Disclosures UNDERGRADUATE LOANS: Fixed rates from 3.75% to 13.30% annual percentage rate (“APR”) (with autopay), variable rates from 1.89% to 11.98 % APR (with autopay). GRADUATE LOANS: Fixed rates from 4.75% to 13.30% APR (with autopay), variable rates from 2.59% to 11.98% APR (with autopay). PARENT LOANS: Fixed rates from 4.48% to 13.55% APR (with autopay), variable rates from 1.69% to 11.98% APR (with autopay). For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 06/17/2022. ⁶ Important Disclosures for Citizens Bank. Citizens Bank Disclosures Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of July 1, 2022, the 30-day average SOFR index is 1.02%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the prime rate plus 9.00%. Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer. Lowest Rate Disclosure: Lowest rates are only available for the most creditworthy applicants, require a 5-year repayment term, immediate repayment, a graduate or medical degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. ⁷ Important Disclosures for Funding U. Funding U Disclosures Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service. ⁸ Important Disclosures for Edly. Edly Disclosures 1. Loan Example: Loans from $5,000 – $20,000 Example: $10,000 IBR Loan with a 7% gross income payment percentage for a Senior student making $65,000 annually throughout the life of the loan. Payments deferred for the first 12 months during final year of education. After which, $270 Monthly payment for 12 months. Then $379 Monthly payment for 44 months. Followed by one final payment of $137 for a total of $20,610 paid over the life of the loan. About this example The initial payment schedule is set upon receiving final terms and upon confirmation by your school of the loan amount. You may repay this loan at any time by paying an effective APR of 23%. The maximum amount you will pay is $22,500 (not including Late Fees and Returned Check Fees, if any). The maximum number of regularly scheduled payments you will make is 60. You will not pay more than 23% APR. No payment is required if your gross earned income is below $30,000 annually or if you lose your job and cannot find employment. 2. Edly Student IBR Loans are unsecured personal student loans issued by FinWise Bank, a Utah chartered commercial bank, member FDIC. All loans are subject to eligibility criteria and review of creditworthiness and history. Terms and conditions apply.