Most students aren’t sure how to begin examining their financial aid packages, so we’ve compiled some tips to help them navigate the process.
Anticipate the family’s contribution
Before reviewing the financial viability of each college option, have a conversation with your students and their families about the total amount of loan debt they are willing to borrow over four years. Mentally preparing to pay that debt in relation to the starting salary range for the career they plan to pursue can put the “true cost” of college in perspective as they evaluate each financial aid offer.
Some families find it helpful to multiply the initial cost of attendance by four to get an idea of the total cost of earning a degree from each school where their student has been admitted. However, you may need to remind students and families that the financial aid application and award processes will be repeated each year. This means that any changes to their financial circumstances or the institutional fees charged would make the financial aid award look a little different in future years.
While the estimated student and parent contributions on award letters may differ from the Expected Family Contribution used to calculate demonstrated need, neither of these numbers might match the amount that families can confidently contribute to the cost of college each year.
Identify direct costs
Direct costs, such as tuition and fees, are typically listed on the award letter and paid directly to the institution. These costs can vary depending on a student’s plan to live on or off campus or purchase a meal plan. Be sure to check the institution’s website for the most up-to-date pricing if the information isn’t easily recognized on the award letter. Many schools will also include the cost of their Student Health Insurance Plan in their direct costs. Encourage your students to contact the financial aid office about alternative ways to cover this cost or, if they already have health insurance, complete the required waiver form to avoid this charge.
Add indirect costs
Each institution will estimate the costs for transportation, personal expenses, books, supplies, and other expenses. Although students often perceive these estimates to be higher than needed, it’s better to be over-prepared when planning for college costs. Buying or renting textbooks can cost more than $500 per term. Ask your students to look up the cost to fly or drive back home around typical holiday breaks for at least four times a year to get the most relevant transportation estimate for each school in consideration. They’ll also want to budget around $1,000-$2,000 per year for personal expenses such as additional food, a cell phone, attendance to social or cultural events, and more. (Note: Some institutions have additional funding to help lower-income students buy winter coats or a textbook library to minimize some indirect costs.)
Calculate gift aid
The scholarships and grants listed on award letters are called gift aid, meaning they don’t need to be repaid! This need-based or merit-based aid will be clearly labeled in the award letter. Although the funds won’t need to be repaid, students should pay close attention to the requirements to renew these awards, such as maintaining a minimum GPA, enrollment in a specific program, or participation in a particular activity.
For students who are awarded a Pell Grant, the amount of that award will be the same at every institution where they were admitted. However, students who are awarded a Supplemental Educational Opportunity Grant (SEOG) may be offered a different amount by each institution where they were admitted.
Find additional funding sources
If gift aid does not cover 100% of students’ direct and indirect costs, it’s time to consider additional sources of funding to determine whether they can afford to attend that school. Additional sources could include outside scholarships, work earnings, and student loans.
Many scholarship organizations prefer to directly pay the institution where the student is enrolled. Be sure to check each college's outside scholarship policy to see how outside scholarships might impact any institutional aid the college has awarded. Students who have received outside scholarships should notify the financial aid office at the institution(s) where they have been accepted so they can receive a revised award letter as soon as possible.
For students who qualify for federal work-study, it’s important to note that this isn’t a guaranteed source of funding. This potential funding depends on students finding, applying to, and getting hired to an approved work-study job at that institution. The amount listed is typically the maximum funding available for the academic year if the student works the maximum number of hours allowed. We recommend that students designate these funds, and any other anticipated work earnings, to pay for personal expenses or other indirect costs.
Decide how much to borrow
If your students plan to borrow money to pay for college, it is crucial for them to understand the different types of student loans available and the implications of borrowing. The way interest accrues and the deadline for paying it will vary depending on the loan type and the lender. Students who plan to use loans to pay for any costs not billed by the institution are responsible for withdrawing the funds disbursed to their student account to make an external payment. Loans are disbursed each term directly to student accounts and must be repaid when the student is no longer enrolled in college for more than six months.
Federal and state-funded loans (subsidized and unsubsidized) will be listed on the award letter with the maximum amount the student can borrow. Students always have the option to decline some, or all, of the loan amounts listed on their award letter. A Parent PLUS loan may also show up on the award letter, but these loans require the student’s parent(s) or guardian(s) to apply for and be approved for this loan. While some institutions include private loans as an option on the award letter, we don’t encourage students to borrow from private lenders unless they have a clear plan to repay the loans after graduation.
Evaluate the total net price
Each college uses their own formula to calculate a student’s financial need, so each financial aid award will look different. If the net price of attendance is not in the ballpark of a student's EFC after loans and work study, that student may want to appeal their financial aid package. Your help navigating the appeals process can be critical, especially for students required to submit sensitive financial documents.
After evaluating additional funding sources, students and families will need to discuss which financial aid offers are financially viable options. With your input, students and families can make an informed decision about accepting the offer that is the best financial fit for their future. If your students have any remaining unmet need, remind them to apply for more scholarships before seeking additional student loans to cover the net price of attendance.