How to Interpret a College Financial Aid Letter
Tool | March 2019

How to Interpret a College Financial Aid Letter

Is it a grant or a loan? Is that loan public or private? College financial aid letters are notoriously hard to decipher. We'll walk you through one.

Financial aid letters from colleges can be confusing, omit important information or make financial aid awards appear more generous than they are.

Legislation that would require schools to show college cost and financial aid information in a more consumer-friendly way is being considered, but any actual changes are years away.

To help you decipher your offer, we created an interactive sample letter. The terms you see below may not exactly match your letter, but our explanations and tips should help you make an informed decision on which deal is best for you.

Scroll over the orange circles below to learn how valuable each type of aid really is.

Special Report: Paying for College

Elite College

Dear Student,

Congratulations on your admission to Elite College. We’ve reviewed your application and the information you provided on the Free Application for Federal Student Aid and are pleased to make the following financial aid offer for the upcoming academic year. 1Each award letter covers one academic year. The types, sources and amounts of aid your student receives can change in subsequent years based on your family’s income and assets, how many members of your family are enrolled in college and other factors.

TIP: Ask the financial aid office how your student’s award is likely to change in future years. To see how the average awards for first-year students compare with those of all undergraduates, visit

Please review the award below carefully and contact our office if you have any questions. You must report any outside scholarships 2Outside scholarships reduce your financial aid package dollar for dollar. Most schools apply the funds to unmet need first, then reduce loans and work-study awards before reducing grant money. Other schools reduce grant awards before reducing loans.

TIP: If your student has received an outside scholarship, say from a community organization, ask the financial aid staff at any school your child is considering about their policy.
to the financial aid office. The deadline to confirm which portions of the award 3Families are not obligated to accept all aid that is offered.

TIP: Go for the free money first – accepting scholarships and grants from the federal or state government or the college. Then, turn to federal loans which generally have better rates and repayment plans than their private counterparts.
you plan to accept is May 1. 4You’ll usually need to work with the financial aid office to accept each part of the financial aid award.

TIP: If your letter doesn’t include a deadline or instructions about what to do next, ask the financial aid office.

Financial Aid Director

Financial Aid Awards 5Most college list all types of financial aid – scholarships, grants, loans and work-study together. Which type of aid each item is may be unclear.

TIP: If any of the listed aid items are confusing or unclear, contact the school’s financial aid office and ask them to clarify the details of any item on the award letter that is unclear.
Federal Pell Grant 6Federal Pell Grants are need-based awards for low-income students. The amount a student receives depends on family income, the school’s cost of attendance and other factors.

TIP: The maximum Pell award amount increases each academic year. The maximum award for the 2019-2020 academic year is $6,195.
Federal Supplemental Educational Opportunity Grant (SEOG) 7Students with exceptional financial need may receive $100 to $4,000 a year.

TIP: This money often runs out, apply for aid early.
State Grant 8Many states offer need-based college grants. Some also offer merit-based awards or grants that consider both merit and financial need.

TIP: Each state has its own financial aid deadline.
Elite College Award 9Most colleges and universities offer their own grants and scholarships based on need or merit.

TIP: Visit the school’s financial aid website to learn about school-wide awards that are available. Awards for students in specific academic programs may be listed there or on department websites.
Federal Work-Study 10Students who receive this award can find an on-campus job and receive a paycheck based on the number of hours they work.

TIP: These funds won’t be immediately available to pay the college bill – but students can use the money to cover their daily expenses throughout the semester.
Federal Direct Subsidized 11These loans are available to undergraduate students with financial need. The feds cover the interest while you’re in school and up to six months after graduation. Students can borrow up to $3,500 four first year, $4,500 your second year and $5,500 after that, for a maximum of $23,00 for undergraduates. The interest rate for loans taken during the 2018-19 academic year is 5.05%, but the rate resets for new loans each year.

TIP: The fixed rate, subsidized interest and flexible repayment terms make this loan a good deal.
Federal Direct Unsubsidized 12All students who apply for federal financial aid – regardless of financial need – are eligible to take an unsubsidized loan. The annual maximum for undergraduates ranges from $5,500 to $7,500, minus any subsidized loans received over the same period. Loans taken during the 2018-19 academic year carry a 5.05% fixed interest rate.

TIP: Interest on this loan begins accruing while you’re still in school. Max out on subsidized federal loans, if possible, before taking other loans.
Elite College Loan 13Schools may offer their own loans in addition to those offered by the Federal government.

TIP: These loans aren’t always a good idea. Check the loan’s interest rate and repayment terms before agreeing to it.
Parent PLUS Loan 14Parents who qualify for a Parent PLUS loan can borrow up to the full cost of their child’s college attendance, minus any financial aid. The interest rate for loans taken during the 2018-19 academic year is a fixed 7.6%.

TIP: Many letters include Parent PLUS loans as part of the student’s award – but parents must apply and be approved for the loan based upon their credit history.
15This letter groups all types of financial aid – including more than $21,000 in loans – under the same umbrella. But blurring the lines between loans and grants can make a college appear more affordable.

TIP: To see how much attending the school will cost your family, determine which items are scholarships and grants (also known as gift aid) and which are loans. Then, consider the gift aid separately from any loans that were included in the award.
Total Award
Cost of Attendance 16Many award letters don’t include detailed cost of attendance information or omit some expenses.

TIP: Make sure you have a full picture of what it will cost to attend the school – including tuition, fees, room and board, books and supplies and transportation. You may need to revise some of the costs that the school lists.
Tuition and fees   $48,532
Room and board 17TIP: This figure is an estimate. Your actual costs will vary based on your student’s living arrangements and meal costs.  $12,768
Books and supplies 18TIP: Schools often underestimate how much students will spend on textbooks and other supplies.  $1,000
Transportation 19TIP: Schools often underestimate how much stills will spend traveling to and from campus. Adjust the transportation expense listed to reflect how far – and how often – your student will likely travel during school breaks.  $500
Total Cost of Attendance$62,800
Total Awards $41,950
20This letter subtracts all types of financial aid – including more than $21,000 in loans – from the school’s sticker price, which makes the school appear to be more affordable.

TIP: To see how much attending the school will cost your family, subtract only scholarships and grants from the school’s sticker price. Consider any loans that are offered separately.
Cost After Aid