The Real Cost of College: Interpreting Financial Aid Award Letters
Along with the coming of spring, every year from mid-March through mid-April, high school seniors from New York to California anxiously await their college acceptances. Of equal concern, are the financial aid award letters that may arrive with those acceptances. Students and their families have a relatively brief period of time, until May 1st, to evaluate the various financial aid awards, as well as the many other facts and figures about the involved colleges, before they are obligated to declare which college their child will attend. A deposit payment must then be sent to hold their child's place for the following fall. If your child is lucky enough to receive a financial aid award, it is critical that you promptly and accurately evaluate the colleges' financial aid packages and compare them to each other. Only then will you be in a position to make an informed decision that can significantly impact your lifestyle as well as long range financial planning. Don't assume that the school with the lowest tuition or the one offering the most grant money is the most affordable. The real measure of an aid package is how much you end up paying in the end.
First determine what the major costs (called the Cost of Attendance or "COA") are to attend each school. It is imperative that you include all directly (tuition, fees, and room and board) and indirectly billed expenses (travel, books, etc.) regardless of whether or not they are reflected in the letter. There is no standard format and some colleges don't include a COA in the award letter, while others include tuition and fees, but omit room and board. Still others omit indirect costs.
Once you determine the costs, group the major aid components together and compare them. Aid comes in three forms, loans which have to be repaid with or without interest, gift aid which consists of grants and merit aid, neither of which have to be repaid and work-study where a student is paid to work part time either on or off-campus. In the latter case, the award letter doesn't typically indicate what the work will be. Comparing the components is sometimes easier said than done. Descriptions of aid in financial aid award letters lack a standard format. Schools can have cryptic acronyms to identify components without indicating which are grants and which are loans or work study.
Once you know what your costs are and how much, and what form of aid your child will be receiving, you can determine what your out-of-pocket costs will be. The difference between the cost of attendance and the amount of grant money and work study that you are offered is ultimately what you will owe. Loans offered in the package may cover part of that amount. They may defer some of the cost initially, but eventually will have to be repaid with interest.
Once you've completed the foregoing analysis, you should then compare the award packages from each school. There are websites, some of which are more reliable than others, to assist families in comparing award packages. However, use of them often requires a certain level of understanding about the financial aid process. The school's financial aid office is always a resource to be called upon to clarify and explain inconsistencies or ambiguities in award letters. Be aware that aid packages aren't necessarily automatically renewable from year to year. Also, some colleges will offer more grants than loans to entice incoming freshman, with the balance shifting to more loans in subsequent years. Educate yourself early about the process so you will be in a position to decode and evaluate financial aid letters leaving you one step closer to making an informed decision that is ultimately in the best interests of your child.
Carolyn Cohen, Esq. is a Certified Educational Consultant and founder of College Pathways located in Chappaqua, New York. For more information, contact Carolyn at firstname.lastname@example.org or 914 260-2754.