A lot of factors go into choosing a college, but one of the biggest is cost.
According to a February 2018 survey by College Ave, seven out of 10 students said the amount they’d have to borrow through student loans impacted their choice of college. And 66% of respondents said they’d select a less prestigious school if it meant they could graduate with no student debt.
But it’s not always easy to figure out what that cost is. Each school sends its own financial aid award letter, and these offers might look very different from school to school.
Here are six important tips to help you decode your letters and compare and contrast your financial aid packages on a case-by-case basis.
1. Review the types of financial aid offered
According to FastWeb, most colleges send out admission offers in late March or early April of your senior year of high school, assuming you applied during the prior fall. Typically, you’ll receive financial aid award letters around the same time and they’ll outline different types of aid.
“Your college aid letter will most likely be made up of a combination of grants, scholarships, work-study options, and loans,” said Matt Hylland, a financial planner at Hylland Capital Management. “Grants and scholarships are generally preferred as they don’t need to be paid back.”
Federal student loans, which are from the U.S. government, and institutional student loans, which are offered directly by a college, are more complex to figure out.
“There are numerous types of student loans available, and each may have different interest rates, repayment schedules, or flexible repayment options,” Hylland said.
Your financial aid award will include offers for federal or institutional student loans, but not from private student loan companies. The letter might indicate how much you can borrow from a private lender, but it won’t give you a specific offer. If there’s a gap between your financial aid award and your estimated cost of attendance, you could apply for private student loans separately.
Note that some aid is based on financial need. The Pell Grant, for instance, goes to students with major financial need, as determined by the Free Application for Federal Student Aid (FAFSA). Work-study opportunities, which allow students to make a certain amount of part-time income each semester, also go to those with financial need.
The aid provided through grants and work-study programs doesn’t have to be paid back. Another example of gift aid, or financial aid that doesn’t have to be paid back, includes need-based, merit-based, or interest-based institutional or private scholarships.
So when you compare one financial aid award letter with another, examine the types of aid listed in each offer carefully. If one package offers more in gift aid than in federal and institutional student loans, it could be the more affordable choice.
2. Look for the amount of renewable aid
Most financial aid letters reveal the cost of attendance only for your freshman year. But there’ll be three more years of college, so it’s important to estimate the total cost of your degree.
At each school you’re considering, determine which offers of grants, loans, and work-study money are renewable, and those that are offered only for one year.
“If you are offered a scholarship, make sure you understand if the scholarship is offered each year or just your first year at the school,” said Hylland.
You also should keep an eye out for renewal requirements. To stay eligible for federal financial aid, for example, you’ll need to make “satisfactory academic progress” while in school.
This usually means maintaining a 2.0 GPA and completing your credits on time. Scholarships often have their own criteria, too.
“Scholarships may also have other requirements such as your GPA, other financing received, or credit hours,” Hylland said. “Make sure that you understand how your scholarship could change in the future.”
You also should look out for financial aid “front-loading.” Some schools offer a lot of aid at the beginning to attract students, and then less in the following years. That could leave you scrambling to cover costs in your sophomore year and later.
When comparing your awards, try to get a sense of the costs for each college for all four years, not just the freshman year.
3. Estimate your own cost of living
Some financial aid award letters will include an estimated cost of living, including expenses such as housing, books, and food. But your actual expenses might be different from the numbers from the financial aid office.
For instance, you could lower your housing expenses by living off campus or commuting from your parents’ house. Other ways include buying used textbooks online or cooking at home instead of buying a pricey meal plan at school.
Instead of accepting the school’s cost of living figures at face value, take the time to add up your own expenses based on your lifestyle.
You also might find that location plays a big factor. Going to a school in the middle of New York City likely will cost you more than studying at a rural or suburban campus elsewhere.
At New York University, for instance, the financial aid office estimates the cost of room and board to be $18,156 for the 2018-2019 academic year. At the University of Wisconsin-Madison, the estimated cost for room and board is $11,114.
Where you choose to attend college could mean a difference of thousands of dollars in living expenses.
4. Decide which parts of aid you want
You don’t have to accept your full financial aid offer to attend a school. Instead, you can pick and choose the parts you want or don’t want.
You might take out fewer federal student loans, for instance, to minimize the amount of debt you’ll have upon graduation. You also could use savings or income from a part-time job to cover college costs.
If you need to borrow federal or private student loans, make sure you understand the terms and conditions before borrowing. According to the College Ave survey, less than one-third of students felt confident that they could understand the financial terms in the world of student loans.
Take the time to learn how student loans work before borrowing.
5. Calculate your net cost of attendance
Once you’ve estimated your living costs and determined which aid offer to accept, it’s time to calculate your net cost of attendance. That’s your school’s total cost minus the aid you’ll receive.
Amy J. Mahon of Reich Asset Management works with families to plan for the costs of college. She recommends using a simple spreadsheet to compare your offers.
“I compile all of the aid offers into a spreadsheet,” Mahon said. “The first column contains the total cost of attendance [in] the aid offers the student received with a bottom-line net cost. The second column contains percentages based on the average need met by the school as a whole and then broken down by gift aid and loans.”
You also can compare financial aid offers via the College Board’s online tool to understand a college’s true cost of attendance.
For example, consider two colleges that show the same net cost of attendance, at $5,000 per year.
Annual cost of attendance
Net cost of attendance
But the full cost of attendance is different. When you break down the offers, you’ll realize that you’d need to take out $20,000 more in loans to attend Ivy College instead of State University. Our student loan calculator will show you that borrowing $25,000 at a 5.00% interest rate to attend Ivy would require monthly payments of $265 for 10 years to pay off the debt.
If you multiply that figure by four years of college, you might graduate from Ivy with $100,000 in total student loans in contrast to $20,000 from State. So even though your net cost looks similar at first glance, the total costs at the two colleges might vary hugely.
6. Remember you can ask for more aid
If your heart is set on a college whose financial aid offer falls short of the costs, you could try appealing for more aid.
Contact the financial aid office to discuss your situation, and find out if it can help ease your financial burden.
If there’s a big change in your financial situation — for example, a parent lost a job or had another child — you also can update your FAFSA.
According to the College Ave survey, 26% of respondents asked for more aid after receiving their award letters, while 37% of the students wished they had.
Although receiving more aid isn’t a guaranteed outcome, it can’t hurt to ask if you feel your financial situation qualifies you for additional grants, scholarships, or student loans.
Choose a college that works for your budget
Crunching the numbers in your tuition bills probably isn’t as exciting as shopping for your new dorm room. But it’s an important step of choosing a college, and you’ll be happy you did it when you graduate and realize you don’t face huge student loan bills.
Take the time now to compare your financial aid award letters, and make sure to contact the financial aid office if anything is unclear. By evaluating your financial aid options, you’ll be able to choose a college that helps you reach your goals and works for your family’s budget.
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