Decoding Your Financial Aid Award Letter (Part I)

So, you’ve applied to college and received your first acceptance letter (or even letters). Woo! Congratulations! You should be massively proud of yourself. Now that you’ve jumped the first hurdle, you can focus on the second hurdle: affordability. Can you afford to attend your first (or second or third) choice school?

This is where the Financial Aid Award Letter joins the race. However, many times the letter itself can feel like another hurdle. If you’re stumped and trying to figure out how to translate the information on your Award Letter into a concrete “I can or cannot afford this,” let me help. Here in Financial Services at King’s, I’ve worked with many families who, just by having a better understanding of the language on their Award Letter, learned that they were receiving more aid than they thought—and that’s exciting!

Direct Costs vs. Indirect Costs

Direct costs refer to anything that will appear on your billing statement as debits. At King’s, that’s tuition & fees, housing (if living in on-campus housing), and course material fees for specific classes (if applicable). These costs do not change. Depending on your college, this could also include the cost of a meal plan and other expenses billed by the college/university.

Indirect costs relate to food, books, and transportation to name a few–living expenses that are necessary but do not appear on your billing statement. These are all estimated costs and factor into your total Cost of Attendance (COA) for the academic year (the COA is located at the end of King’s Award Letter). Your COA does not include your financial aid (scholarships, grants, and loans), so don’t panic at your COA since it doesn’t reflect your out-of-pocket costs.

Pro Tip: You have total control over indirect costs and can spend much less than the estimated amount. During my college years, for example, I purposely chose to only buy coffee when going out with friends—those daily few dollars on coffee add up!—and I bought almost all of my books used online or from upperclassmen.

Scholarships & Grants

This is hands-down the best part of the Award Letter. Here at King’s, institutional scholarships are merit-based (GPA, achievement, test scores, etc) and grants are needs-based and require a yearly FAFSA—both are free money! You don’t pay these back and they appear on your billing statement as credits. Institutional scholarships typically renew yearly (i.e. our Presidential scholarship renews each year if you earn a 1.8 GPA for freshman, 1.9 GPA for sophomores, and 2.0 GPA for juniors and seniors). It’s a good idea to ask your Admissions Counselor or a financial aid team member if the scholarships are renewable or one-time awards.

Federal Student Loans

If you plan to use loans, Federal Stafford loans are definitely the best option to use first. If you’re worried about taking student loans, check out this post! Here are a few things to consider:

• Stafford loans come through your FAFSA and have the best interest rates (as of 2/5/21 the rate is at 2.75% for undergrad loans).
• If you have Stafford loans listed on your Award Letter, you already qualify for them. You don’t need to reapply. You’ll just complete loan Entrance Counseling, a Master Promissory Note (MPN), and an Annual Student Loan Acknowledgement.
• If you qualify, a portion of your loan may be Subsidized which means it doesn’t accrue interest while you are in college.
• Unsubsidized Stafford loans do accrue interest, but at that lower interest rate above.

On the King’s Award Letter, the third page takes your direct costs and subtracts out your scholarships, grants, and loans. This leaves you with an amount that we call your “remaining balance,” also known as your out-of-pocket costs.

Check out my next post “Decoding Your Financial Aid Award Letter (Part II)” to learn more about ways to tackle this remaining balance!

// Photo by Scott Graham //