When you receive a financial aid award letter the first thing you want to know is how much the college will cost after financial aid is factored in.
It should, in fact, be very easy for you to figure out how much the college is charging your family for the first year of college.
Unfortunately, this is rarely the case.
This is because many colleges only provide some of the information you need to figure out the net price they are charging your family and most colleges present the information in a way that is confusing or misleading.
Remember, the net price (costs minus discounts) is the figure that matters most. The net price is rarely, if ever, clearly stated on the financial aid award letter.
So, you will have to use a step by step approach to decode and untangle the information provided on the financial aid award letter and calculate and the Net Price that each school is charging your family.
Step 1 – Download the Award Letter Decoder
The Award Letter Decoder helps you compute and compare the Net Price for each college.
Step 2 – Record the Sticker Price (Estimated Cost of Attendance)
Record all the basic expenses in the Sticker Price section of the Award Letter Decoder:
Some colleges provide incomplete cost estimates (or no cost estimates at all) on their award letters, so you might have to track down some of the estimated expenses on the school website and/or compute your own estimates. You will find very detailed information about how to evaluate expenses in the College Expenses section.
Step 3 – Identify the Grants & Scholarships
Enter all Grants & Scholarships listed on the financial aid award letter in the Discount Section. If the award is a grant or scholarship it should say so on the award letter. But financial aid offices use a lot of acronyms so when in doubt, ask them to confirm that the award is a grant or scholarship.
Step 4 – Record Student Loans and Work-Study Awards
Because student loans and work-study awards are not discounts, they don’t factor into the Net Price calculation. They appear in the financial aid award letters because federal student loans and work-study awards are considered “financial aid” and they are, in fact, very useful sources of funding that help students pay for college.
If you decide to use student loans to help pay for college it is very important that you review your borrowing options (and requirements) for all four years and estimate the how much your monthly repayment amount will be after graduation. Review common repayment scenarios and learn about the different options for managing and repaying your student loan debt.
Ignore PLUS awards for now
Federal Parent Loans (PLUS) also appear on many financial aid award letters and are often presented in a confusing manner that makes the loan appear to be special financial aid that is awarded by the college. In fact, Federal PLUS is a financing option that is available to MOST parents regardless of whether or not it appears on a financial aid award letter.
Parent may ultimately choose to borrow through the PLUS program (after reviewing all parent borrowing options and estimating repayments amounts!) but don’t let this “award” distract you from the Net Price comparisons when you are decoding award letters.
Step 5 – Compare Net Price Results and Remaining Amount to be Paid
The Award Letter Decoder will now display the Net Price and the Remaining Amount to be Paid for each school for the first year and provide a four year calculation as well.
Although the four year estimates are not adjusted for future cost increases, it is a useful snapshot of total costs. That said, it is almost guaranteed that the Sticker Price will rise each year by whatever amount the school increases tuition, fees, room & board charges, while in many cases the Discounts will NOT increase – resulting in an increase to your NET PRICE each year.