Navigating the Confusion of Your Child's Financial Aid Award Letters


Financial Aid

Can you think of a piece of mail more exciting than a college acceptance letter? It’s a celebrated step toward a student’s a post-secondary education, and (hopefully) a great job. But tucked away next to that congratulatory message is something a bit less clear: the financial-aid award letter.

Regardless of the institution it comes from, the financial-aid award letter is notoriously confusing. In some cases, loans and grants are lumped together with the school’s scholarships, making the net cost of attendance difficult to determine. At first glance students and parents are often left thinking that the cost of college is lower than it really is.

From the White House to the National Association of Student Financial Aid Administrators (NASFAA), various institutions have set out to standardize this letter into an easy-to-understand document that can be used to compare costs from college to college. In July 2012, Education Secretary Arne Duncan published an open letter to college and university presidents asking them to adopt the Obama Administration’s Shopping Sheet as a way to standardize the breakdown of student aid. As of January 2013, over 600 institutions had adopted the standardized format.

If the school you (or your child) are considering uses the recommended shopping sheet, the glossary below can help you navigate financial aid offerings. If they use a different format or you are still confused, consider calling the school’s financial aid office for a walk-through.

  • Estimated Cost of Attendance generally includes tuition and fees, housing and meals, books and supplies, transportation and any other educational costs.
  • Expected Family Contribution, or EFC, is the number that is used to determine your eligibility for federal student financial aid, and is generated using the information you provided on your FASFA.
  • Federal Pell Grants are awarded to first time undergraduate students and do not have to be repaid.
  • Federal Perkins Loans are available to undergraduate and graduate students with financial need at an interest rate of 5%. Your school is the lender, but not all schools offer this program.
  • Federal Direct Subsidized Loans are available to undergraduate students with financial need, and loan amount is determined by your school. The U.S. Department of Education pays the interest while you are in school at least half-time and for the six months following graduation or during a deferment period.
  • Federal Direct Unsubsidized Loans are available to undergraduate and graduate students with financial need, and your school determines loan amount.  On an unsubsidized loan, you are responsible for paying interest.
  • Loan options are those recommended by your school; you do not have to accept all or any of these loans.
  • Net Cost is the cost of attendance minus grants and scholarships.
  • PLUS Loans – these are available to students and parents of dependent undergraduates. The lender is the U.S. Department of Education and the loans have a fixed interest rate of 7.9%.
  • Work-Study refers to part-time jobs for undergraduate and graduate students with financial need, and often incorporates community service or the student’s field of study.  Availability of jobs is not guaranteed.

For more tips on paying off your student debt, check out our Student Loan Resource series.




Briana Fabbri is a personal lending expert and knows the benefits of great budgeting. She currently works as Head of UK Business for Enova International.