First off, congratulations! At this point in the year, you’ve hopefully heard back from most of the schools you applied to, and are receiving letters from the financial aid office with the results from your FAFSA. If the cost of college is a factor in your decision, these letters are critical pieces of information that determine where you go to school!

Unfortunately, every school follows a different format for presenting information. Let’s break down this information into more workable terms. So gather all the financial aid award letters you’ve received thus far, and read on for a few tips to help you better understand them!

Before getting started...

Some schools present numbers in terms of two semesters (fall and spring), three semesters (fall, spring, and summer), quarter terms, or a full year. Choose one metric to more easily compare costs between each of your schools. Personally, I prefer to show all costs in terms of one year, since that is how federal aid is offered, and is the easiest way to compare between schools with different academic semesters.

Breaking Down Actual Costs

Grants, loans, scholarships, work study, room & board, tuition & fees… what goes into calculating the bottom line of what you’ll actually have to pay? College award letters are full of numbers that can be grouped together to create a simpler way to understand what you are responsible for versus what aid you’re receiving. Let’s go through each category individually:

Cost of College = Tuition + Fees + Room + Board. Note that this is different than Cost of Attendance, that some schools may or may not include on their award letters. Cost of Attendance is larger, and includes indirect costs such as travel expenses, personal purchases, and textbook costs. Since these vary and are (mostly) transferable to any school, I exclude them to focus exclusively on what the school will send you in a bill.

Free Money = Grants + Scholarships. Grants are typically need-based, and could come from the government or the school. Scholarships are awarded to you, and can come from the school or outside organizations. Although grants and scholarships are different, combine them together for your total Free Money category.

A note about work-study: While receiving work-study is a great option to help pay for school, you still have to maintain a work-study job on campus in order to receive the funds. The school is providing a rough estimate on how much you could make (typically around $2,600). However, if you realize after a few weeks of school that you don’t have time for a job, you won’t be receiving those funds! Therefore, since it isn’t guaranteed, it is best to take this number out.

Borrowed Money = Loans. Completing the FAFSA allows all students access to the Federal Stafford Loan program, totaling $5,500 for first year students. Some schools include Parent Loans on award letters - throw this number out too! While students have a cap on how much they can borrow, parents can take out as much as the full cost of attendance. Therefore, since they can be used to pick up any remaining balance, keep them in mind for the end but not in calculating costs at the beginning.

Existing Money = This is on you. Do have a college savings account or a 529 Plan? What about a summer job? How much do you and your parents reasonably expect to contribute to school? This may not be as simple of a number to figure out, but is the most important part of the equation.

GAP = What’s the difference? This may be a positive or negative number. If it is negative and more than the Borrowed Money category, you may not need any student loans. If it is positive, compare the difference between each of your schools. The Gap will show you how much you’ll need to make up in scholarship dollars, additional outside student loans, parent loans, etc. This is also a key number in demonstrating if attending one of your school options is financially feasible or not.

Decision Time!

Pay close attention to the instructions included in your financial aid package. Even most scholarships require your official acceptance of the award, typically in a student portal or a signed letter returned to campus. If you were given any aid you don’t plan to use (i.e., loans), follow the instructions for declining the offer. After thoroughly reviewing all your options, you’re ready to make your college decision!

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