How to Read a College Financial Aid Award Letter (and Compare Offers)

A financial aid award letter is the college's offer of how it proposes to help pay for your first year. The trouble is that there is no single required format, so two schools can describe nearly the same package in ways that look completely different. The first step in comparing offers is to sort every line into one of a few simple categories. We do not publish dollar figures or tuition data on this site, because they differ for every family and school, so this guide is about method.

Step 1: sort every line into four buckets

• Grants and scholarships. This is gift aid. It does not have to be repaid. It may come from the college, the federal or a state government, or an outside organization.
• Work-study. This is the chance to earn money through a campus job. It is not a credit toward your bill. You have to apply for the job, and the amount you earn depends on hours worked.
• Federal student loans. This is borrowed money that must be repaid, usually with interest. Even when a letter lists it alongside grants, it is not a discount.
• Other loans. Some letters include parent loans or private loans. These also must be repaid, and the terms can be very different from federal loans.

The most common mistake is adding loans and work-study to the total "aid" figure. A letter that shows a large aid number but is mostly loans is a very different offer from one that is mostly grants.

Step 2: find the net price

A college's published cost of attendance, often called the sticker price, is what the school estimates a year costs before any aid: tuition, fees, housing, food, books, and other expenses. The net price is generally that cost minus grants and scholarships. Loans and work-study are not subtracted, because you either repay them or earn them.

Many award letters do not state the net price at all. One study of award letters found that fewer than half included it. If yours does not, calculate it yourself: take the cost of attendance, subtract only the grants and scholarships, and compare the result across schools. Colleges also post a net price calculator on their websites, which you can use before you apply. Our college pages link to a search for each school's calculator.

Step 3: check what is one-time and what renews

• Is the scholarship renewable for all four years, or only the first?
• What do you have to do to keep it, such as a minimum GPA, a credit load, or a specific major?
• Does the grant keep pace with future price increases?
• Is part of the package a one-year offer, such as a first-year-only award?

A package that looks smaller in year one but renews fully can be a better deal than a larger first-year offer that shrinks.

Step 4: line the offers up in a simple table

Make one column per college and one row each for cost of attendance, grants and scholarships, net price, federal loans offered, work-study offered, and renewal conditions. The act of filling in the same rows for each school removes most of the confusion. Our FAFSA vs. CSS Profile guide explains why some schools ask for extra forms and why offers can differ for the same family.

Step 5: ask questions and, if it makes sense, appeal

• If your family's circumstances have changed since you filed, such as a job loss or a major medical expense, tell the financial aid office. Schools commonly have a process for reviewing this.
• If another school has offered you more, some colleges will reconsider. Ask politely and send the other letter if they request it.
• If you are not sure what a line means, call the financial aid office. That is their job, and they field these questions every spring.

A word on borrowing

Borrowing is a real cost. Before you accept any loan, ask what it will cost over time, who is responsible for repaying it, and whether you can borrow less. The student aid site, StudentAid.gov, is the official source for federal loan information.

None of this is financial advice. Check every figure with the college's financial aid office, and if the numbers feel heavy, talk them through with your counselor or a financial professional.