Interpreting Your Financial Award Letters Can Be a Complicated Task

Applying and subsequently gaining admission to a college or university is an exciting time for both you and your student. However, the exhilaration of an acceptance letter is invariably followed by the typically more sobering award letter; wherein you learn what will be expected of you financially. That is at least, their intended purpose. According to financial expert Mark Kantrowitz, almost 1/3 of financial aid award letters underestimate some of the costs of attendance, while other costs go unacknowledged altogether. On top of these inaccuracies, the use of obfuscating terminology has only grown in prevalence among some schools, making it difficult to differentiate grant aid from loans. Financial award letters have become more and more complicated, and navigating them correctly could be the difference of thousands of dollars.

Pitfalls of Financial Award Letters

There are various reasons for the discrepancies, for instance, lack of standardization; as well as other more cynical theories. Whatever the reasons, the two biggest problems you are likely to face when trying to decipher your award letter are missing or understated expenses and confusing terminology.

Underestimations and Missing Expenses: You will find on your award letter an estimate of expenses will need to be covered with either aid, or your Estimated Family Contribution (EFC). This will be an aggregate of expenses such as tuition and room and board; these particular expenses are known as direct costs. Due to the lack of standardization the other expenses you may find can vary quite considerably. Some may list text books or other miscellaneous expenses, but the fact remains that many of the indirect expenses associated with the college experience are missing from these estimations despite the fact that they can make up as much as half of the actual cost of attendance. Transportation, school supplies, home supplies, furniture, computers, insurance, and the general costs of living probably will not be factored into the award letter you receive, leaving you with an inaccurate representation of what will be expected of you financially.

Confusing Terminology: Determining which kind of aid you are receiving is another crucial component of understanding your award letter. From a definition stand point, the difference between Gift Aid such as grants (the kind you want more of), and Self-Help Aid such as work study and loans (the kind you don’t necessarily want more of) is fairly self-explanatory. The problem lies in the way some universities choose to name their grants, scholarships and loans, as well as how that aid will be applied to your expenses and what affect it will have on your EFC. The word loan may not even show up in reference to a particular award, leaving you to understandably believe it to be a different type of aid. Instead of being relegated to their own specific sections, loans and grants are often presented together with only an “L” or “LN” to indicate one from the other. Moreover, even if you can ascertain whether you’re dealing with a grant or a loan, the terms and conditions of that loan (such as interest rates and monthly payment amounts) will be conspicuously missing from your award letter. Most troubling are the letters that present loans as if they are reducing your costs instead of helping you pay them, which is a huge distinction.

Unfortunately, missing expenses and confusing wording may only be part of the problem. Your award letter may not mention the schools unmet need percentage (though it really should). In fact, a more expensive school that has lower unmet need may end up being a better value than a less expensive school with more unmet need. Less than favorable unmet percentages are not something that a school will likely want to readily advertise, which may be one of the reasons you won’t find it on your award letter.

Know Your Financial Options

Should your award letter be egregiously unfavorable to the point of error, YOU DO NOT HAVE TO ACCEPT IT! You have the option to turn down either a portion, or the entire award presented to you. Furthermore you can appeal the award decision without fear of any punitive measures such as loss of acceptance to the school; in fact, you really have nothing to lose if you think it will help.

At My College Planning Team we are here to help our clients cut through the confusion of financial aid award letters to give you the most honest picture of what your financial contribution will look like, and ways to mitigate it even further. If after review we agree that it is warranted, we will even assist in the appeal process to help you get a more favorable award at no additional cost.

If you are not yet one of our clients we would be pleased to assist you. Our Financial Team offers a complimentary consultation for parents of college-bound students – click here to schedule now.  Contact us so we can evaluate your situation and give you an estimate of our fee based on the number of award letters you want reviewed and on whether or not you should also process an appeal for additional financial aid.

You should know what is expected of you financially to pay for your student’s college expenses and we’re here to help you fill in any blanks your award letter may have left.