The Biggest College Financial Aid Package May Not Be the Best One

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Brian O'Connell

By Brian O'Connell

October 26, 2020


There’s no question the cost of attending college is getting out of hand, with no hint of slowing down, either.

According to the College Board, the average cost of attending an in-state public college was $22,180 in the 2020-2021 academic year. Meanwhile, the cost of attending a private college during the same timeframe stood at $50,770.

Additionally, the growth rate of college costs isn’t headed in the direction college-bound families prefer.

Data from the College Board also shows that college tuition is increasing at a rate of 3% to 4% in recent years — and that doesn’t include necessary costs like housing, food, and books, which adds $10,000 or more a year to the college cost bill for U.S. households.

Shades of Gray with College Financial Aid Letters

These figures, alarming as they are, at least incentivize students and families to master the fine art of choosing the college with the best financial aid package that works for them.

That’s important, especially when the temptation is to take the financial aid package that stacks up the most dollars – no matter where those dollars originate.

The need to consider financial aid packages carefully is amplified when the fact that most college financial aid award letters are confusing, if not downright misleading, particularly in the following ways:

  • Financial aid award letters often blur the distinction between grants and loans, potentially contributing to the growth in student loan debt. After all, if you don’t know how much debt there is in the award letter, you might end up borrowing more than you want.
  • About half of colleges front-load grants, meaning that the net price will be higher in subsequent years than during the freshman year, creating a “bait and switch” scenario that comes back to bite cash-strapped students and families.
  • More expensive colleges tend to have bigger grants, but the net price might still be more expensive than a college with a lower sticker price, even if you get no aid. 

With an uphill climb in understanding financial aid award letter, learning how to read the letters is a necessity.

Mastering the College Financial Aid Package

How can you maximize the financial aid you’ve been awarded in a college aid financial letter? Take these action steps – each of which can upgrade your chances of getting the best financial deal from a financial aid award letter:

Adopt a mindset that bigger isn’t always better. Taking the financial aid package that offers the most dollar signs could well be counterproductive – especially if you don’t understand the difference between scholarships/grants and student loans.

Instead of focusing on the size of your financial aid package, streamline the scenario by how much money you’re getting for free (in loans and scholarships) and how much you’re going to have to pay back – with interest – after graduation.

Above all, remember that all financial aid letters are not created equal. The more financial aid you’re getting for free, the better. The more student loan debt you have to pay back, the more you’ll fall behind down the road, when you have to pay the loans back.

Consider not just how much you will have to pay up front, but also how much you’ll have to pay after you graduate.

What’s the net price of attending the college? The number at the bottom of your financial aid award letter isn’t necessarily the amount of money you’ll really be shelling out for a semester on campus.

The net price is the amount that remains after grants and scholarships are subtracted from total college costs. It is the discounted sticker price. This is the amount you will have to pay through savings, loans and other family resources. A lower net price means less debt after graduation.

Colleges with a higher sticker price might offer more grants than a less-expensive in-state public college, but still end up with a higher net price. If you get a $10,000 “merit” scholarship at a private college that charges $50,000 a year, you’ll still be paying double the net price of an in-state public college. Are the bragging rights really worth taking on more debt?

Note that the financial aid award letter might list only tuition and fees, possibly also housing and a meal plan, if it lists any college costs at all. Important necessities like books and supplies, along with the cost of transport between your home and your college might be missing.

Go on a scavenger hunt on the college’s web site to find the actual total cost of attendance, not the fiction that sometimes appears in the award letter.

Also, figure on adding $300 to $500 a month to the total college costs to cover miscellaneous personal expenses, such as laundry, shampoo and walking-around money.

You can always appeal. If the number on your financial form isn’t to your liking, you have the right to appeal it.

After all, the letter is only an offer, and you don’t have to accept it if you don’t like that offer. You don’t have a thing to lose in appealing (colleges can’t pull an acceptance offer if you appeal), and you can contest a portion or all of the award offer.

An appeal for more financial aid is more likely to be successful if it is based on special circumstances that affect your ability to pay for college. Special circumstances can include job loss or a decrease in income, death, divorce, disability, and dependent care costs.

When you appeal, contact the college financial aid office and ask about its appeal process. Some are strict and some are more lenient. Abide by the appeal rules and make sure you note any changes in your family’s financial status since two years ago – the year upon which income is reported on the FAFSA. Also note anything that differentiates you financially from the typical family.

If all else fails, accept the admissions offer of a college with a lower net price.

Factors to Keep in Mind

When you review your financial aid award, keep these action points in mind.

You don’t have to accept a financial aid letter. But if you do, make sure you sign the letter and return it by the deadline date. College money goes to the first who claim it. If you miss a deadline, you may well miss out on the money.

Ask about disbursement. Each college may have a unique way of distributing financial aid, so make sure to ask your college how the financial money is distributed and how much of that aid is applied to your tuition bill. You’ll want to know how much in out of pocket costs you’ll be paying, and the sooner you know, the sooner you can plan for it. Most colleges apply financial aid first to tuition and other institutional costs, and refund the remainder to the student within two weeks.

Fill in the information gaps. Many college financial aid award letters blend student loans, student employment, scholarships and grants together in random fashion, and that’s a problem. Additionally, aid letters don’t include critical information like interest rates on loans or monthly loan payment amounts.

If that’s the case with your award letter, call your college’s financial aid office and ask what figures represent loans and what figure represents grants and scholarships. Ask about loan interest rates and monthly repayment mounts on a 10-year repayment term, too. That will help you understand the real college costs.


Breaking Letters Down

Deciphering college financial aid letters isn’t easy, and some colleges aren’t helping by the hazy way they lay out aid information in those letters. (About two thousand colleges have adopted a standardized financial aid award letter called the Financial Aid Shopping Sheet. But, that still leaves thousands of colleges with financial aid award letters that are designed to mislead families about true college costs.)

That said, it’s up to students and parents to study up on financial aid award letters and figure out the best ways to break down the information. That will yield the best aid package that works for a college student’s unique college financing needs.

[Editor’s note: Published on March 17, 2019. Updated on October 26, 2020.]

A good place to start:

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