Understanding Financial Aid Award Letters
Wednesday, April 30, 2008
As the cost of college continues to rise (tuition at George Washington is closing in on $40,000), the financial award letter can often be just as important as the college acceptance letter in determining where you plan on going to college. Understanding the financial aid award letter will help you and your parents make a well-informed decision about your college future.
We like to refer to the tuition rates you see published on a school's website or in college guidebooks as the "sticker price." As with cars, most people don't end up paying the "sticker price." Colleges offer "discounts" off the "sticker price" in the form of scholarships, grants, work-study, and loans. The financial aid award letter lays out these "discounts". It's not just the size of the "discounts", but the make-up of these "discounts" that's important.
Check out a sample financial aid award letter.
What you want to look for on your financial aid award letter
Financial Aid Letter Part #1: Cost of Attendance
First off, take a look at the make-up of the cost of attendance. Some colleges will break out the expenses into categories like tuition, room and board, travel, and personal expenses. Colleges may differ on what they include in the cost of attendance. You want to be confident you are comparing apples to apples throughout this process. Make sure you are clear on what has been factored into the cost of attendance and, more importantly, what has not been incorporated into the cost of attendance.
Financial Aid Letter Part #2: Expected Family Contribution
Secondly, you want to locate what the school is expecting you and your parents to contribute out of pocket based on the financial aid office's assessment of your and your parents' financial situations. Some schools will provide a single "Expected Family Contribution" while others may break this amount into a Student's Contribution and Parents' Contribution. This is the school basically saying "We looked at your finances, and we think you and your parents can afford to pay $___ toward college."
Financial Aid Letter Part #3: Financial Aid Offered - Amount and Mix
Now, we get to the real guts of the financial aid award letter where the school lays out what types of aid they are offering and how much of each type. This is where you really want to take a good hard look and make sure you understand what's going on. The mix of the financial aid is as important (if not more important) than the amount. Free money (that means scholarships and grants) is the best type of financial aid. Federal loans such as Perkins Loans and Subsidized Stafford Loans are better than private loans, but they still need to be repaid. It's also important to remember that you don't just get federal work-study money. You're going to have to get a job on campus and actually earn that money. The federal work-study amount on your letter is the maximum amount you can receive, not a guaranteed amount. So to recap, here are the financial aid types from best to worst:
- "Free Money"... that's scholarships and grants (renewable scholarships are better than one-time awards)
- Federal loans (Perkins, subsidized Stafford, unsubsidized Stafford)
- Private loans
Financial Aid Letter Part #4: Unmet Need
Okay, so now you understand how much financial aid the school is offering and what types of aid are included in your package. The next step is determining if there is any unmet need. You can determine the unmet need by taking the cost of attendance and subtracting the expected family contribution (what the school said you can afford to pay) and the financial aid package (what the school has offered you to meet your financial need).
In mathematical terms:
COA - (EFC + Financial Aid) = Unmet Need.
Typically the lower the unmet need, the better. However, as we said before, a school may be offering less aid and leaving you with more unmet need, but may actually still be a better deal if their financial aid package contains mostly "free money" and fewer loans.
Questions You Should Ask
How will my financial aid package change over time?
The package you receive your sophomore year may look different than the one you receive for freshman year. Find out whether scholarships are renewable or one-time awards. See if there are certain requirements for keeping scholarships (e.g., maintaining a 3.0 GPA).
How do outside scholarships affect my financial aid package?
If have done a great job searching for scholarships and have won a few awards, make sure you understand how these scholarships will impact your package. Some colleges will reduce the loan component to offset these outside scholarships, while others will unfortunately reduce the scholarship / grant component of your financial aid package. Colleges will usually spell out this information in their Outside Scholarship Policy.
Some Help Comparing Financial Aid Packages
So now you know what to look out for when comparing financial aid packages, and all you need is a tool to help you compare them. Well, you are in luck. We've developed a Financial Aid Award Evaluator so you can view side-by-side comparisons of your financial aid award letters for up to 4 colleges.
We also offer a tool to help you compare student loans. Our Student Loan Marketplace enables you to dig into the guts of a student loan and really understand how all the parts of a loan (interest rate, up-front fees, borrower benefits) come together to impact how much you actually have to pay.
Labels: award letter, EFC, financial aid, financial need, unmet need
Finding and Comparing Student Loans
Tuesday, April 8, 2008
For many of you, taking out student loans is a necessary part of going to college. You're probably already receiving letters and e-mails from student lenders, highlighting the "benefits" of their student loan program. It's no easy task sorting through all your options.
Which Student Loan is Best
Navigating your way through the maze of private student loan options can be difficult, even if you're a math genius. One lender is offering you money back when you graduate. Another lender lowers your interest rate if you set up bill payment by auto-debiting your bank account. How do you decide which student loan is best for you?
Student Loan Marketplace
It just so happens that CollegeToolkit.com now has a tool to help you make apples-to-apples comparisons of Stafford, PLUS, and Private loans. It can be difficult to compare loans that may have different interest rates, origination fees, and borrower benefits. Student loans have lots of moving parts and figuring out which option is better for you can be a dizzying task.
Our Student Loan Marketplace makes it easy for you to find a whole bunch of loan options in one place and then compare them side-by-side. We even help you make sense of all the ins and outs by providing a single number called a Loan Cost Index that you can use to make comparisons about which loan may be the best for you.
What is the Loan Cost Index?
Our Loan Cost Index gives you a quick sense of how costly a loan is (in today's dollars). Think of it as kind of like a price tag for a student loan, the lower the number the better. We want to help you become a bargain hunter when it comes to student loans.
Let's walk you through a quick example. You select a student loan with a Loan Cost Index of 125. That means that for every $100 in student loans that you take out, you will be repaying $125 (in today's dollars). Our Loan Cost Index takes into account the interest rate of the loan, any borrower benefits for the student loan, and any upfront fees as well as other factors like in-school and grace periods.
The Loan Marketplace also lets you customize the results. If you want to exclude all borrower benefits, you can. If you plan on making interest payments for your private loan while in school, that's possible, too.
The Loan Marketplace is intended to help you make good decisions when it comes to picking the best student loan for you and your parents.
A Word of Advice about Student Loans
One thing we hope you keep in mind before you start your search for private loans, make sure you take advantage of more affordable funding options first. That includes, searching for scholarships and taking advantage of federal loan programs like Stafford loans. Once you've done that, you're ready to turn your attention to private loans.
Labels: comparing loans, financial aid, PLUS loans, private loans, Stafford loans, student loans
Making the Most of Your Summers
Wednesday, February 20, 2008
It may still be winter, but it's probably not too early to start thinking about what you want to do this summer. If you wait too long, you may find yourself sitting on the couch all summer or working at a job you don't really like. A little research and some planning ahead could help you make your summer a really valuable experience... and a big plus on your college application.
First off, it's important to take some time to consider what you want to get out of the summer. Do you want to make some money so you can put a little aside for college? Do you want to look for an exciting internship, getting a taste of the working world and exploring your career options? Do you want to take summer classes at a college campus, feeling out what university life is like?
For many of you, a summer academic program may be on your radar screen. No, we're not talking about summer school, where kids retake classes they may have failed the previous year. We're talking about hands-on academic experiences where you're likely to learn inside and outside the classroom. These summer programs can be a great option and offer some major benefits.
A Taste of College
Summer academic programs can be a great way to see what college life is like before you set foot on campus as a freshman. Many take place on major college campuses, have you living in actual college dorms, and taking classes from real college professors. It's almost like you get to take a test drive of college. You'll likely be tackling challenging academic topics and gaining a much better sense of the additional demands placed on college students. It's also a great way to really delve into an academic area like biology, photography, or business that you are passionate about.
A Real Plus on Your College Application
High school transcripts, admissions essays, SAT scores... they are all used by college admissions committees to determine if you will be a student who will excel at their college. But what better way is there to show you can do well in a college academic setting than by doing well in a college academic setting? Taking on the challenge of a college summer program may help you overcome an SAT score that is on the low end of the scale for a college or a little stumble on your high school transcript.
Actual College Credit
Not only could a summer program help you get into college, it may give you a head start once you get there. Many summer programs offer academic credit at the host college. You will need to check with whatever college you end up attending to see if you are able to transfer this credit.
Cost Can Be an Issue
Cost can vary pretty significantly from program to program. A summer college program can often cost thousands of dollars. But don't be discouraged if you can't afford that price tag. Many programs offer need-based scholarships. You might also take a look at Governor's Schools that many states have. These are typically free or very affordable summer residential programs for high-achieving students. Upward Bound programs might also be great options for lower-income students.
Summer Program Resources
We've provided links to a few sites that may be helpful in your search for some great summer programs:
We've also included links to summer programs at some of the top colleges:
Labels: admissions, college, summer