Spring is in the air and that means one thing for high school seniors: college acceptance letters are arriving along with their financial aid packages. It’s an exciting time for both parents and students, but it can also be a confusing time as well. Especially if you don’t understand the award letter or how to compare the various awards once they arrive.

After you’ve been accepted to a college or university, and complete the FAFSA, you should receive a financial aid award letter. The typical financial aid award letter consists of the following: the college’s cost of attendance, college scholarships and grants, work study and loans.

After completing the FAFSA, your EFC (Expected Family Contribution) is calculated. The ideal award offers aid to make up the difference between the EFC and the cost of tuition. Before you choose a college‘s aid package, follow these steps to understand what you are being offered—award letters typically contain the following components:

  1. “Free” Aid (Merit Aid)–This is money that you do not need to pay back. This can be in the form of federal and/or state grants, but might also come from the colleges themselves.
  2. Federal Work Study–If you qualify for work-study, a certain amount of jobs are set aside on campus for students who qualify. You can use the earnings from this job to put toward your college expenses.
  3. Loans–Pay attention to the types of loans offered to you—especially to see if they are subsidized (deferred interest during college) or unsubsidized (interest is NOT deferred during college). Remember, any money you borrow must be repaid, so think before you accept those student loan offers.
  4. Your Estimated Family Contribution. Your award letter will list what they expect you to pay. Some colleges do not meet the full demonstrated financial need for all students, but instead leave a gap. This usually occurs at colleges with limited student aid budgets.

Special Circumstances

Sometimes events that impact your finances (job loss, divorce, unexpected medical costs) take place after a financial aid award is calculated. Or, your financial aid paperwork may seem like it doesn’t reflect your financial situation—such as taking care of an elderly family member. If you fall into any of these categories, contact your school’s financial aid office immediately—you may be eligible for additional aid.

Outside Scholarships

If you win any outside scholarships, you have to tell the college about them. Unfortunately, federal regulations require the college to reduce your need-based aid package when you win an outside scholarship. Colleges do, however, have some flexibility in how they reduce your financial aid package. Many will use the outside scholarship to first fill any gap, and then use half the funds to reduce loans and half to reduce grants. Ask the college for information about its outside scholarship policy if this will affect you.

Comparing Costs

Compare all the financial aid packages offered from the various colleges that you receive award letters from. Pay special attention to the type of aid that is awarded and make your college decision based on each college’s award package. You can decline to accept any or all of the aid that is offered. The U.S. Department of Education provides a simple worksheet to help you compare financial aid awards.

Dealing with a Gap

Colleges will often admit students but not meet their financial need. This is called “gapping”. When a college does this, they are basically saying that they need to meet their admissions quota, but aren’t willing to offer you any incentive to attend. In some cases the gap can be huge. When a college does this, they are hoping you will decline their offer of admission. What should you do? Decline it! They obviously don’t value your contribution to their student body. Choose a college that is willing to give you substantial aid because they want you to attend.


If you receive multiple awards you can use them to negotiate for additional aid. Use the awards as a bargaining tool with colleges and attempt to negotiate more aid.

Colleges use financial aid awards to entice students into accepting their offer of admission. This is the college you want to attend–one that values your contribution and is willing to put their money where their mouth is!

Do you have any questions about the components of a financial aid package? Leave us a comment and we will be happy to answer your questions!

One comment on “Understanding Financial Aid Awards

  • Hi. How does one go about negotiating with one college, who offered a standard merit scholarship and has your student’s name in the queue for an Honor’s merit scholarship, when another college has provided three merit scholarships, including an Honor’s merit scholarship? With whom do you negotiate, i.e Dept of Financial Aid, Honors Program? We made our eagerness to receive the Honors scholarship well known to Dept. Head of her Major, the Dir. of Admissions to the Honors Program, and to the Fin Aid Office; but the responses we received were that they couldn’t help. Thank you.

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