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

How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

Editorial Note: This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution.

award letter
Logo

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?

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 ACollege BCollege 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 2021!
LenderVariable APREligibility 
1.04% – 11.98%1Undergraduate, Graduate, and Parents

Visit College Ave

1.13% – 11.23%*,2Undergraduate, Graduate, and Parents

Visit SallieMae

3.80% – 9.36%3Undergraduate and Graduate

Visit CommonBond

1.05% – 11.44%4Undergraduate and Graduate

Visit Earnest

1.22% – 11.66%5Undergraduate and Graduate

Visit SoFi

1.68% – 11.98%6Undergraduate and Graduate

VISIT CITIZENS

1.24% – 11.99%7Undergraduate and Graduate

Visit Discover

* 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 either Firstrust 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 4/22/2021. Variable interest rates may increase after consummation. Lowest advertised rates 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 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.  If you choose to complete an application, we will conduct a hard credit pull, which may affect your credit score. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.


4 Important Disclosures for Earnest.

Earnest Disclosures

  1. Rates include 0.25% Auto Pay Discount
     
  2. Explanation of Rates “With Autopay” (APD)
    Rates shown include 0.25% APR discount when client agrees to make monthly principal and interest payments by automatic electronic payment. Use of autopay is not required to receive an Earnest loan.

    Available Terms
    For Cosigned loans – 5, 7, 10, 12, 15 years. 
    Primary Only – 10, 12, 15 years

    In school deferred payment is not available in AL, AZ, CA, FL, MA, MD, MI, ND, NY, PA, and WA).


5 Important Disclosures for SoFi.

sofiDisclosures

UNDERGRADUATE LOANS: Fixed rates from 4.23% to 11.26% annual percentage rate (“APR”) (with autopay), variable rates from 1.22% to 11.66% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 11.37% APR (with autopay), variable rates from 1.12% to 11.73% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.30% to 11.52% APR (with autopay), variable rates from 1.29% to 11.89% APR (with autopay). PARENT LOANS: Fixed rates from 4.60% to 10.76% APR (with autopay), variable rates from 1.22% to 11.16% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. 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 4/1/2021. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (www.nmlsconsumeraccess.org).


6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

Undergraduate Rate Disclosure: Variable interest rates range from 1.68% – 11.98% (1.68% – 11.07% APR)Fixed interest rates range from 4.24% – 12.40% (4.24% – 11.43% APR).

Graduate Rate Disclosure: Variable interest rates range from 1.91% – 11.63% (1.91% – 11.33% APR). Fixed interest rates range from 4.64% – 11.93% (4.64% – 11.61% APR).

Business/Law Rate Disclosure: Variable interest rates range from 1.91% – 10.19% (1.91% – 9.47% APR). Fixed interest rates range from 4.38% – 10.44% (4.38% – 9.72% APR).

Medical/Dental Rate Disclosure: Variable interest rates range from 1.91% – 8.99% (1.91% – 8.69% APR). Fixed interest rates range from 4.28% – 9.24% (4.28% – 8.94% APR).

Parent Loan Rate Disclosure: Variable interest rates range from 2.49% – 8.33% (2.49% – 8.33% APR). Fixed interest rates range from 4.94% – 8.58% (4.94% – 8.58% APR).

Bar Study Rate Disclosure: Variable interest rates range from 4.46% – 9.60% (4.46% – 9.54% APR). Fixed interest rates range from 7.39% – 12.94% (7.40% – 12.83% APR).

Medical Residency Rate Disclosure: Variable interest rates range from 3.55% – 7.05% (3.55% – 6.78% APR). Fixed interest rates range from 6.99% – 10.49% (6.98% – 10.09% APR).

Variable Rate Disclosure: Variable Rates are based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of May 10, 2021, the one-month LIBOR rate is 0.11%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable rate is the greater of 21.00% or 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 require a 5-year repayment term, immediate repayment, a graduate 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.

Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer.  Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.

Eligibility Criteria: Applicants must be a U.S. citizen, permanent resident, or eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For applicants who have not attained the age of majority in their state of residence, a co-signer is required. Citizens Bank reserves the right to modify eligibility criteria at any time. Citizens Bank private student loans are subject to credit qualification, completion of a loan application/Promissory Note, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens Bank participating school.

Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.

Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.


7 Important Disclosures for Discover.

Discover Disclosures

  1. Aggregate loan limits apply.
  2. Get a cash reward on each new Discover undergraduate and graduate student loan when you earn at least a 3.0 GPA (or equivalent) in any academic period covered by the loan. Limitations Apply. Visit DiscoverStudentLoans.com/Reward for terms and conditions.
  3. Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest and highest interest rates offered on Discover student loans, including undergraduate, graduate, health professions, law and MBA Loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.250% as of April 1, 2021. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Your APR will be determined after you apply. Learn more about Discover Student Loans interest rates at DiscoverStudentLoans.com/Rates.
  4. Lowest APRs shown for Discover Private Consolidation Loans are available for the most creditworthy applicants who are approved and choose a shorter repayment term, and include a 0.25% interest rate reduction while enrolled in automatic payments. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.250% as of April 1, 2021. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Your APR will be determined after you apply. Visit Discover.com/student-loans/consolidation.html for more information, including up-to-date interest rates and APRs.
Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.