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How to Read a Financial Aid Award Letter [With 2 Examples]

You've narrowed down your list of colleges, sent in your applications and filled out your FAFSA form online. After you receive your acceptance letters, the college financial aid office will ‘package you’, meaning you will receive a financial aid award letter detailing exactly how much it will cost you to attend their college.  

It is important to understand Financial Aid terminology because there is no standardized financial aid package. In this article, we'll define the following terms to help you understand your financial aid award letter:

  • COA
  • EFC
  • Work-study
  • Pell Grant
  • State Grant
  • Institutional Grant
  • Merit Scholarship
  • Federal Direct Student Loan (Unsubsidized vs Subsidized)
  • Parent Plus Loans



COA = Cost of Attendance. In other words, this includes: tuition, room, board, books, and other fees. 



EFC = Estimated Family Contribution. This is the amount your family will be expected to pay out of pocket. To find out your EFC use this calculator



Eligible students work on campus between 5-10 hours per week at minimum wage. You must have selected ‘yes’ to the work-study question on the FAFSA in order to have it on your Financial Aid Package. Do not count on this money to pay tuition bills as you must work before receiving a paycheck. Work-study is typically used for spending money during the school year.


Pell Grant 

Pell Grants are Federal Government grants. These do not have to be repaid. It is based on family income in addition to other criteria on the FAFSA. The maximum amount for the school year 2019-2020 is $6,195. Amounts can change yearly, so you should check current Pell Grant award amounts here. You may use Pell Grants for a maximum of 12 semesters.


State Grants

State Grants - The name and amount of the grant changes state by state. The deadline to file the FAFSA in order to receive state grants also varies. A grant does not need to be repaid.


Institutional Grant 

Institutional Grants are financial aid that is given out by the college based on family need. The amount and requirements vary by college/university.  


Merit Scholarships 

Merit scholarships are money earned by the student based on grades/test scores and not by financial need.


Federal Direct Student Loans 

  1. Unsubsidized Federal Student Loans - A loan given in the student’s name that must be paid back. The government does not subsidize this loan, meaning the interest accrues while you are in college. You will begin paying back this loan 6 months after leaving college.
  2. Subsidized Federal Student Loans - A loan given in the student's name that must be paid back. The Federal government pays the interest on subsidized loans while you are in college and then begins accruing interest 6 months after you leave college.

Neither subsidized or unsubsidized federal student loans require credit checks. Read more about these types of federal loans here. 


Parent Plus Loans 

Parent Plus Loans are offered to a parent, who must pass a credit check, when the financial aid package does not cover the full cost of college for a student. This can be a very risky way to pay for college and interest rates are higher than Direct Student Loans. 


Examples of Financial Aid Packages

So, now that you have an understanding of the terms that will be included in your financial aid packages, here are some further tips about comparing financial aid packages.


Below are two examples of Financial Aid Packages. Test your knowledge using the above descriptions to decide if you would accept the aid offers or continue looking for a school that is affordable to you.

Example Financial Aid Package: University #1

COA or Cost of Attendance   Financial Aid Package  
Tuition & Fees $7,870 Federal Pell Grant $6,195
Room & Board $9,128 State Grant $2,000
Books $1,314 Academic Scholarships $2,000
    Unsubsidized Direct Student Loan $2,000
TOTAL COA $18,312 Subsidized Direct Student Loan $3,500


COA - Financial Aid Package = Cash Still Needed to attend

$18,312 - $15,695 = $2,617 needed to attend University #1


Extra costs that you must still consider include: transportation to and from college, everyday personal expenses such as toiletries and loan origination fees.  

Does your family have any college savings?  How could you earn $2,617 in order to accept this offer?

Example Financial Aid Package: University #2

COA or Cost of Attendance   Financial Aid Package  
Tuition $53,180 Federal Pell Grant $6,195
Fees $1,260 Institutional Grant $60,224
Books $1,000 Unsubsidized Direct Student Loan $2,000
Room & Board $17,1000 Subsidized Direct Student Loan $3,500
    Work-study $1,535
TOTAL COA $72,540    


COA - Financial Aid Package = Cash Still Needed to attend

$72,540 - $73,454 = -$914 refund to the student for University #2


Keep in mind that the $1,535 from work-study will not pay the bills but will be used for spending money, so be prepared to save that amount over the summer. It's also worth remembering that student loans are "full recourse" meaning that they do not go away in bankruptcy. The federal government can decrease your paycheck or even Social Security benefits in order to pay back the student loan.

Evaluating Your Options

As your acceptance letters and financial aid packages start to roll in, this time of year can be exciting and nerve-wracking! We hope this article helped you get a grasp on some of the terms to familiarize yourself with when it comes time to decide where you will enroll, and ultimately, how much it'll cost you to attend. So, which offer would you accept?

Learn more about Scoir

Are you a student or family member hoping to learn more about how Scoir can help you with your college journey? Find out more here.

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