What Does Your Financial Aid Award Mean?
A financial aid award letter can come with a lot of conflicting emotions: excitement, disappointment, and, more often than not, confusion. There is little uniformity among award letters, so comparing offers between schools often feels like comparing apples and oranges. If you want to be a discerning consumer, you need to understand the differences between three main types of aid — grants & scholarships, loans, and work study — and understand which questions to ask about each. It’s important to compare apples with apples and ascertain which college will provide your family the best value:
- Grants & Scholarships. Whether a need-based “grant” or a recruitment “scholarship,” an award of this type is free money. It is a direct discount off the price of enrollment and reduces the bottom-line. The catch to grants and scholarships, however, is what it takes to maintain them. Is the funding a one-time award, or is it renewable for all four years? Are there strings attached, like maintaining a certain GPA? Make sure you read the fine print when considering any grant or scholarship offer and contact the financial aid office to make sure you understand all scholarship renewal policies.
- Loans. Unlike grants and scholarships, student loans don’t reduce the bottom-line — in fact, they generally increase costs (think interest charges). Compare your loan terms to those of other loans you can access (through your state or home equity line, for example), and know that you can reduce or decline any loan offered. And if a college awards an Unsubsidized Direct Loan or Direct PLUS Loan as part of your financial aid package, don’t be fooled into thinking the package is particularly generous. These government loans are available to nearly all US citizens at most colleges.
- Work Study. The final piece of aid you might see on an award letter is work study. The key difference between work study and other types of financial aid is that it does not provide up-front funding to pay the college bill, as do grants and loans. A student is simply given the opportunity to work on campus and earn a certain amount of money throughout the year. You still need to find the job, work the hours, and get paid weekly, as with any other job.
Once you understand the difference between gift aid, like grants & scholarships, which reduce your college costs, and self-help aid, like loans and work study, the final step in deciphering your award packages is to subtract the gift aid offered by each institution from the cost of that particular school (include tuition, fees, room & board, travel, etc.). A pricey school with a generous award package might still end up being more costly than an inexpensive school with a less generous package, but once you’ve ascertained your bottom line cost at each institution, you’ll be better equipped to determine which college will provide the best value for your education dollar.