Comparing Award Letters

ICAN-ComparingAwardLetters

It probably feels like forever since you submitted your FAFSA form and you are still waiting for those final numbers. Then it happens: you get an email saying your award letter is available for review. You may even get a letter in the mail. You rip it open and … then what?

Award letters can be confusing. There are lots of columns and numbers, and often a big number at the bottom that indicates how much is due to the school. Where do you start to try and understand how much a college has awarded you? And, how do you accurately compare the different award packages you’ve received from each school?

Compare by Sections
By breaking down each award letter into comparable sections, you can figure out what your absolute costs are for tuition and room and board, and how your financial aid breaks down into free money (grants and scholarships), work-study and student loans.

There are a lot of tools you can use to compare award letters that will help you understand and breakdown these different areas. The Iowa College Access Network has a downloadable worksheet for Comparing College Costs available at www.ICANsucceed.org/materials, as well as other materials to help you understand award packages.

Going Beyond the First Year
Understanding your costs over your full tenure at a college or university is also an important piece of the college financing puzzle. These award letters will only outline a single year. You need to make decisions based on the full two or four years you will spend working toward your degree.

If your award package has you borrowing $10,000 for your first year, you should consider that you will likely borrow a minimum of $10,000 every year for a total of $40,000. If the career or major you are pursuing has a starting salary of only $28,000 you are already over-budget. You should aim to only borrow no more than your expected first-year starting salary. If you’re starting salary is $28,000, your top budget for borrowing to cover your education costs should be no more than $28,000. This puts you into a manageable repayment scenario after graduation, with payments you can afford.

Look for Other Options
An alternative to borrowing that may not be listed on your award letter is a payment plan through the college financial aid office. Many times you can make monthly payments, interest free, rather than borrowing a student loan to cover the remainder of your costs.

Award letters can be confusing, especially when trying to factor in the total number of years and the free money versus what you may or may not need to borrow. It’s important to have all the facts before making the decision on which school you want to attend. In addition to the online resources mentioned here, you can also call the Iowa College Access Network (ICAN) and speak to a student success advisor about any part of the financial aid process, including award letter review.

By: Iowa College Access Network

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Minimize Your Student Loan Debt: Declining Awarded Student Loans

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Colleges sometimes include the maximum available federal student and parent loans on financial aid award letters to bring the amount of awarded financial aid closer to the total cost of attendance. It’s not always clear that you don’t need to accept the full amount of all loans if you don’t want to.

If you can reduce your expenses or earn more money to offset awarded loans, you will have less debt after you graduate. When you use student loans, you’ll not only need to repay the amount of the loan, you’ll also be responsible for interest. And, it won’t matter if you don’t finish school, don’t find a job or earn less than you expected. Once you accept the loan, you (or your parents in the case of a federal PLUS Loan for parents) are responsible for repaying it.

If you are awarded more loan funds than you think you will need, it’s important to decide exactly how much you will need in loans.

Need some, but not all, of the awarded federal student loan amount? You can always accept only the loan amount you need. You may:

  • Fill in the amount you want to take out on the document you return the financial aid office if you need to sign and return a paper copy.
  • Choose the electronic option for accepting or declining each applicable loan, or for taking out a partial loan amount, if you accept your financial aid online.
  • Contact the financial aid office if you are unable to determine how to accept a partial award.

Can you forego all loans? Many students have the goal to attend college loan-free. Even if you know you will eventually need to take out some loans, declining all loans for one semester will save you capitalized interest later on. If you want to decline the offered loans:

  • Cross out the loan amount or select the “decline” option on the document you return the financial aid office if you need to sign and return a paper copy.
  • Choose the electronic option for declining each applicable loan if you accept your financial aid online.
  • Contact the financial aid office if you are unable to determine how to decline loans.

Considering PLUS Loans? Although PLUS Loans may appear to be part of your awarded financial aid, your parents need to request these loans. Because they will also be responsible for repayment, discuss your parents’ expectations with them.

By: Iowa Student Loan

Comparing Financial Aid Awards

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If you’ve been accepted by and submitted your Free Application for Federal Student Aid (FAFSA) to more than one college, you will receive financial aid packets from each of them. And, if money is a factor in your final college decision, you’ll need to compare the award packets to understand the bottom line at each college.

Award packets may come in a variety of forms, making it difficult to compare accurately. Here are some tips.

1. Clarify the information.

  • Make sure you understand what each acronym, abbreviation or initialism means.
  • Check to see if grants and scholarships are awarded for first-year students only or if they are renewable. Also clarify the requirements for renewal and make an objective prediction on your ability to meet those requirements. (A 3.5 GPA may not be realistic for many students in certain majors, for example.)
  • Contact the college’s financial aid office if you’ve had major financial situation arise since you filed the FAFSA, such as a parent becoming unemployed or facing large medical expenses. The amount the college expects your family to contribute to your education (called the EFC), may change based on the college’s policies.
  • If you have any questions about the information in an award packet, contact the college’s financial aid office.

2. Set up a comparison tool.

  • You can use a simple spreadsheet to list categories of costs, aid and your own contributions, across colleges.
  • An alternative is to use a format similar to the U.S. Department of Education’s shopping sheet. Some of your award notifications may be provided in this form.

3. Compare like costs.

  • You will pay certain costs — such as tuition, campus and class fees, and housing and meals if you live on campus — directly to the college. Others — such as books and supplies, transportation — are paid to other businesses.
  • College may use different terms or categories for the same costs. Housing and meals, for example, is usually equivalent to room and board. Some will provide a single “other expenses” category while others break out transportation, personal and other costs. Make sure you compare apples to apples between colleges.
  • As you compare costs, make adjustments to the provided expected costs for your personal situation. Tuition, fees, housing and meals will be accurate for everyone, but other expenses, like transportation and personal expenses, are dependent on your habits and circumstances.

4. Compare like aid.

  • Remember that you do not need to repay grants and scholarships, but that first-year aid may be replaced by loans in future years.
  • Work-study is generally paid to you in the form of a paycheck, rather than applied directly to your college bill. You also need to obtain a work-study position to receive that aid.
  • You will need to repay federal loans with interest after you leave school. Make sure you understand if any of the loans shown are not federal, but a private loan intended to cover anything not paid for by savings or by government and institutional financial aid.
  • Some colleges show federal PLUS Loans for parents that can be used to make up any funding gap after other aid. This is a loan that your parents may take out in their name, and you should discuss their willingness to do so with them.

5. Consider your own contributions.

  • In general, your savings and earnings will be close to the same no matter where you attend college, unless your grandmother will pay you to attend her alma mater or if you won’t be able to find a part-time job near a particular campus.
  • Think about whether any outside scholarships or grants apply only to certain colleges or if the college in question will reduce its offered scholarships and grants based on your outside awards.

6. Do some math.

  • Subtract the aid, earnings and other contributions from the cost of attendance to discover your funding gap, or the amount you still need to come up with to pay for that college.
  • You will need to cover your gap each year you attend.
  • Any federal loans included in your financial aid will need to be repaid, in addition to any private loans you or your parents take out to cover your funding gap.

By: Iowa Student Loan

Five Key Facts About Your Award Package

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While college acceptance letters are often exciting, the arrival of financial aid award packages can be confusing. Keep these five things in mind as you review your financial aid awards to limit stress.

1. Financial aid is not all free money. Depending on the college or university, financial aid may be presented under one large heading or broken down by type. Remember that work-study and loans, including federal and supplemental loans, are also part of financial aid packages. Work-study requires you to find and obtain work on campus, and loans must be paid back with interest after you graduate or leave college.

2. Cost of attendance varies by college. Like the types of aid offered, college costs may be grouped together under one category or split into different groupings, such as tuition; room and board, which is sometimes called housing and meals; and miscellaneous expenses. This can be tricky when comparing costs between schools. Be sure you understand what is included in each category to get a true comparison.

3. Expenses may increase and free aid may decrease after your freshman year. College tuition, on-campus housing and meal plans will likely cost more each year you’re in school. Grants and scholarships you’re offered to attend a college as a freshman, on the other hand, may decrease in future years. Find out if scholarships and grants are for one year or if they are renewable. If they can be renewed each year, be sure you understand any requirements you must meet to keep those awards. Also, be aware that federal loan amounts may increase every year you’re in college, but those funds will need to be paid back with interest in the future.

4. Work-study requires work now. If your award package includes a line for work-study, don’t assume the college will have a job waiting for you when you arrive on campus in the fall. As soon as you decide on a college, touch base with the financial aid office to determine what steps you need to take to get a job on campus. Then, apply for the job(s) you are interested in or seek out other opportunities to count on that money coming in once you start classes.

5. Outside scholarship may impact your award package. You need to report any scholarships or grants you receive from sources outside of the government or college to the financial aid office. While those outside scholarships may reduce the aid you’re eligible to receive, they can also help you borrow less if you need loans, so don’t be afraid of finding as much outside free money as possible.

By: Iowa Student Loan

What to Expect: Financial Aid Notifications

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Although you submit your Free Application for Federal Student Aid (FAFSA) to the federal government, you’ll receive information about your awarded financial aid from the schools that have accepted you and that you listed on your FAFSA.

Information about each college’s financial aid or award package could begin arriving in March, either electronically or by mail.

Electronic Notification. If your college notifies you electronically, you’ll need to log in to the college’s website.

  • Check your admissions letter for information about login information if you haven’t created an account yet.
  • Look for messages about your financial aid award. You may need to follow a link or navigate to a specific page.
  • The information for cost of attendance, gift aid like scholarships and grants, and other aid like federal loans, may be conveyed in a series of screens.

Mail Notification. Your college may notify you of your eligibility for financial aid by mail. Although each college’s award notification may look different, you may receive one of the following:

  • A single-page letter showing either all costs and all aid for the first year, or just the aid you’ve been awarded for the year.
  • A multi-page award packet that may include detailed information about the cost of attendance, including tuition, fees, housing and meals and other expenses, and all aid you are eligible for.
  • A shopping sheet that includes school-specific information on a template provided by the U.S. Department of Education.

Once you have your financial aid award packets, you can start to compare costs and awards from multiple schools.

By: Iowa Student Loan