Justin Munio

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Financial Aid | Choosing a College | March 28, 2012

How to Dissect a Financial Aid Award Letter

By Justin Munio | For StudentAdvisor.com

The amount of correspondence your student gets from colleges can be staggering. Before they’re even accepted you’ll be getting mountains of brochures, pamphlets, and other marketing materials. Then, once they do get in, even more information gets sent your way: housing forms, deposit slips, acceptance letters, campus information, and more.

There is one piece of mail you’ll be getting that should be studied carefully, since it will have a pretty big impact on your wallet. That is the financial aid award letter. However, be aware that some colleges are moving towards electronic financial award letters. This means that rather than getting an envelope in the mail, you get login instructions in an email for the college’s website. So with all your emails coming in during this time, be sure to keep an eye out for it!


Your award letter may look simple enough, but packed into that piece of paper is information on how much money your student is getting from the college, as well as how much your family will be expected to pay. No, it isn’t the same thing as a college bill, but it does serve the same purpose: letting you know how much college is going to cost.

Break Down the Different Types of Financial Aid

Award letters will typically contain one or more of the following components: Scholarships, Grants, Work-Study, and Student Loans. How much your student receives depends on many things (Merit, your EFC, Demonstrated Need, Cost of Attendance to name a few) but the goal here is to define each and figure out what they mean to your bottom line.

Scholarships and Grants
Scholarships and Grants are forms of “free money”. This means that they do not have to be paid back to the college, the government, or whoever it was that gave them out. Every college has their own criteria for awarding this money, but typically we find that scholarships are Merit-Based (meaning they are contingent upon student grades, test scores, etc) and grants are Need-Based (meaning they are contingent on the family’s financial picture).

If a scholarship or grant is Merit-Based, it is important to find out what the criteria is to keep that money. Your student may have to maintain a certain GPA in order to continue receiving those funds, something that is good to know in advance.

Federal Work-Study
Work-Study is a form of “self-help”, meaning you aren’t just given the money up front. In this case, you have to work for it. This is usually done by getting a job on campus and working a set amount of hours every week. The student is paid at least minimum wage either weekly or biweekly. It is important to note that Work-Study does not come directly off the bill. Instead, the student works, gets paid, and is then expected to apply those funds to the college bill. Whether the student does this or not is another question entirely, but this is the concept of Work-Study.

Student Loans
Student Loans are also a form of “self-help”, because in this case the money eventually has to be paid back. The most common student loans are Stafford Loans (subsidized and unsubsidized) and Perkins Loans.

Federal Stafford Loans and Federal Perkins Loans are good because they are fixed rate, government guaranteed, do not require a co-signer or credit check, and payment is typically deferred until after the student graduates.

Be Careful of PLUS Loans!

It should be noted that PLUS loans, which are parent loans, are NOT a form of financial aid. Some colleges put these loans on their award letters, but don’t be fooled. Sure, the PLUS program is a federal program where parents can borrow for their student’s education, but it is NOT considered financial aid.

Student Positioning vs. Financial Positioning

While every college awards financial aid differently, these are the four main types of aid that your student could receive. Of course we’d like to see more scholarship and grant money than anything else, but that depends on Student Positioning (for Merit money) and Financial Positioning (for Need-Based money). These are also important topics, but for another day and another article. Until next time…