The Mysteries of the College Financial Aid Award Letter

By Joe Messinger, CFP®

March 4, 2022

3 min READ

Updated March 2022.

If you have seen Capstone Wealth Partners present at high schools, or through At The Core, we often kick off the presentation with two key questions:

1. How many of you are concerned about your child getting into their dream school?

2. If they get in, how many of you are concerned about how to pay for it?

The answers are always the same — 100% of attendees say yes!

The truth is that many families aren’t even sure how to read their financial aid award letter — let alone how to evaluate whether or not it’s a “good” offer.

Evaluating Your Award Letter

Parents across the country are asking:

How in the world am I supposed to afford college if I can’t even understand what it will cost over the next 4-5 (sometimes 6!) years?

Maybe the financial aid award letters need to come with a secret decoder ring à la A Christmas Story…“Be sure to drink your Ovaltine!”

All kidding aside, there are a few key steps to follow to successfully evaluate your award letter.

1. Ensure financial aid offered in your award letter isn’t just for year one. You want coverage for all 4-5 years of school.
2. Check to see the average 4-year graduation rate of your student’s chosen school or program. What’s the likelihood they’ll trip over into a 5th or 6th year to earn their degree? Will aid be provided if they do?
3. Evaluate the financial aid you’ve been offered. Some aid is true “gift money” — scholarships and grants. However, other programs like work studies or student loans are also technically classified as “self-help” aid. Of course, you have to either work for or pay back these funds, and that should be taken into consideration!
4. Check what the net cost of the college is in your award letter, and ask if tuition is locked in for all four years, or if it will increase.
5. Estimate your student’s total monthly loan payment after they graduate. This can make the cost of attendance more “real” and help to empower them to make strategic financial decisions about where they attend.

Need help evaluating your award letter? Our recent blog post drills down into specifics of each element a college outlines in its letter to help you make an educated decision about where your student will attend (and how you’ll fund it!).

What All Parents Need to Know

The vast majority of financial aid award letters will cover the following expenses:

1. First year’s tuition
2. Room
3. Board
4. Fees
5. Gift money (think: scholarships or grants)
6. Possible student loans or work-study programs available

The trick is that many financial aid award letters only cover the first year of expenses. In other words, if tuition rates change, or your student moves to more expensive housing or a scholarship only is offered to freshmen, those won’t be reflected in the letter. Another thing to be aware of is that there is no “standard” for financial aid award letters. Every award letter can (and will!) look different. It can help to create a separate document or list where you can bullet out everything you know about the cost of attendance at each school your child is accepted to. This can help you build an apples-to-apples comparison to make a more informed decision about attendance.

Leveraging Our College Money Report™

One thing that can help you to evaluate your college offers, understand what you’re expected to pay out of pocket (or through loans), and find where you’re most eligible for financial aid is our College Money Report™. It will help to reiterate and reframe what you’re seeing in complex financial aid award letters and (hopefully) help you to anticipate awards from any other schools that haven’t gotten back to you yet with a financial aid award letter. You can get a free copy of your report by clicking here.

Making a College Decision

We encourage families to wait until they have all of the financial aid award letters and compare the true “net cost” for each school. The letters come in all shapes and sizes and making a true apples-to-apples comparison can be difficult. Be sure to understand the difference between “Gift Aid”, grants and scholarships you do not pay back, versus “Self Help”, work-study which your student works to earn, and student loans that will need to be repaid.

Looking for award letter comparison resources? Here is a good tool to try and get an apples-to-apples comparison.

And remember — we are always here to help! Reach out to us today by scheduling a call here.