How to Understand Your College Financial Aid Offer

Follow these steps to decipher your aid offer and understand your options for covering the cost of college.

After completing the FAFSA, the colleges you’ve been accepted to will send you a financial aid offer showing the amount and type(s) of financial aid that you could use to cover tuition and other college expenses. It’s important to understand that colleges use the term “financial aid” to include grants, scholarships, and work study — which you do not have to pay back in the future — as well as loans, which you do have to repay. Identifying the different types of aid you are offered will be an important factor in determining the affordability of the schools you are considering — remember, loans are not “free” money.

 If your letter does not clearly spell out that portion of financial aid which comes from a loan, you should ask the school’s financial aid office to provide that information to you.

If you’re a new student, you’ll receive a separate offer from each college where you’ve been admitted, which will allow you to compare affordability. Once you’re enrolled, you’ll get a new aid offer each year and you can use it to develop a plan for covering out-of-pocket costs.

Aid offers can be confusing — and sometimes misleading — because they don’t always include the same information in the same format. The steps below will help you decipher your aid offer to understand what a college will actually cost you, and your options for covering that cost.

How to Figure Out What You’ll Actually Need to Pay for College

Step 1: Find Your Estimated Cost of College Attendance

This figure includes all the expenses you’ll need to cover to enroll and stay enrolled, including:

  • Direct costs, like tuition and fees, are fixed and would appear on any bill due to the college at the beginning of the semester.
  •  Indirect costs like transportation costs and any other personal expenses that you will have to cover throughout the year. Are estimates provided by the school to help you budget. You’re own expected expenses may vary from the figures provided on your aid offer. 

Step 2: Add Up the Gift Aid (Aid That Doesn’t Need to Be Earned or Repaid)

Your aid offer will likely include different ways to finance your cost of attendance. Some colleges separate out grants and scholarships from loans and work study offers, but others do not. If your offer letter doesn’t distinguish gift aid from resources that need to be earned or repaid, simply add up the grants and scholarships to get the total amount of gift aid. 

  • If you’re not sure what’s a grant or scholarship, ask your financial aid office. 

Step 3: Find the Net Price of College

One of the most important pieces of information on your financial aid offer is the “net price.” It tells you the amount you’ll need to save, earn, or borrow to cover costs remaining after your grants and scholarships. If you’ve received financial aid offers from multiple schools, the net price is the figure you want to compare to understand which colleges are more or less affordable. 

Some aid offers will calculate the net price for you. If you don’t see it listed, calculate it yourself by subtracting the total amount of gift aid you identified in Step 2 from your cost of attendance. It’s important to understand that loans are not free and should not be included in your net price calculation. Instead, any student loans you take out will be used to pay the net price. 

  • You can use the CFPB’s Financial Path to Graduation tool to understand and compare your financial aid offers and create a plan for paying for college.

Be on the Lookout!

Does your Aid offer Reflect your Plans? Make sure you identify any assumptions the school is making for your cost of attendance estimate. For example, the typical aid offer assumes you will be a full-time student. Your costs, and also your financial aid, are likely to be lower if you attend less than full time. Costs also depend on whether you live on campus, off campus, or at home with family, so be sure to consider living costs that reflects your expected living arrangement.

Does your Aid Offer Appear Too Good to Be True? Aid offers may show cost calculations that look similar to net price but only account for some elements of cost, or include loans in addition to gift aid. Calculations may show a figure of zero, suggesting your college costs are fully covered. Take the time to understand exactly what types of cost and financial aid are included in any calculation you see, and ask the financial aid office if you need help identifying your net price. Also make sure that the calculation you’re using to compare different colleges’ costs is the same — different calculations can be useful, but in order to make fair comparisons, you need to use the same calculation. 

Options for Covering the Net Price of College 

Once you know your net price, explore your options for covering that cost. You and your family may have college savings that can help. Working while you’re in school is also an option, but keep in mind that working too many hours a week can make it harder to focus on studying and graduate on time. If your savings and expected earnings from a modest work schedule can’t cover the full net price, consider your borrowing options. If you’re still left with uncovered costs, you may want to consider more affordable colleges. Options for covering the net price of college include:

  • Federal Work Study: Unlike student loan funds, which are often disbursed in one lump sum each semester, you’ll receive federal work study aid as you earn it. As a result, work study is particularly well suited to help you cover expenses you face throughout the year.
  • Other Borrowing Options: You may also want to consider additional borrowing options. Compared to federal student loans, these options tend to be costlier, with fewer protections, so be sure to weigh all your options, and read the fine print.  Other borrowing options include:
    • Federal Parent Loans, called Parent PLUS Loans, have higher interest rates and fees than federal student loans but have fewer credit requirements than private education loans. 
    • Private (nonfederal) Education Loans: While private loans can be used for college-related costs, they are not financial aid. Borrowing a private loan is similar to paying for your education with a credit card. Private loans often have higher interest rates and fees, and fewer protections and repayment options, than federal loans.
    • Some Schools and States have Their Own Education Loan Programs. The terms and protections of these loans can vary widely, and they can be just as risky and costly as private loans. 

Next Steps After Receiving Financial Aid Offer:

  1. Contact the school’s financial aid office with any questions you have, or if you need more information (for example, where to find the total cost of attendance or what assumptions are made for the cost estimates included in your offer). 
  2. Take note of what you need to do to accept the aid you want to receive, including deadlines. This includes responding to any requests for additional documentation needed to process your aid.
  3. While there is no guarantee of additional aid, if you’ve analyzed your aid offer and found that you’ll have trouble covering college costs, even with all your financial aid options, you can request additional aid at any time. For more guidance on what to do if your financial aid falls short, click here.
  4. Keep in mind that your aid offer may change in future years. Some grants and scholarships may not be guaranteed for future years, and they may also have special requirements to maintain them (for example, a minimum GPA). Take some time to understand what will be required to keep the aid you’re expecting.

A resource from the Peter G. Peterson Foundation, created with support from The Institute for College Access and Success (TICAS)