There is a reason every student should complete the FAFSA, the Free Application for Federal Student Aid. It’s not just a very tedious step in an already long process; it’s necessary for students, and their parents or guardians, as they’re making a plan to pay for college. After submitting the FAFSA – and being admitted into college(s) – students can expect to receive a financial aid award letter from their school. This letter, which typically arrives between January and April, spells out the details of your financial aid package. So before we dive any deeper, you may be wondering, “what is a financial aid award letter?”A financial aid award letter outlines the different types of financial aid from multiple sources. It is intended to help fill the gap between your Expected Family Contribution (EFC), which is determined by submitting the FAFSA, and the college costs, oftentimes referred to as COA. Your financial aid package, as outlined in the award letter, is based on your financial need:
As you navigate this part of the college application process, you will undoubtedly have questions. Fortunately, we have answers.
• Difficulty identifying each component listed: Financial aid award letters may use acronyms or verbiage that you’re not familiar with. You may find that there are grants, work study, or loans listed, but it’s not obvious as to which category they fall into. Also, when loans are included on the award letter, they rarely include details, like interest rates, fees, years to repay, etc. Some loans may appear to be need-based, but they’re really co-branded private loans. • Front-loading of grants: Some colleges may entice students by “front-loading” financial aid packages with grants for the first year or two and then loans the last two. This is, in part, to help students who may have to drop out after a few semesters. When they do so, they won’t be loaded down with student loan debt. However, you need to ask if all four years will look the same as the first; it’s on you to ask if the financial aid package will remain the same. • Packaging non-need-based aid: Some colleges will include non-need-based loan options like the unsubsidized loan, PLUS loan, and private student loans; while others will not. As you compare letters, it may seem that you’re eligible for these at some schools but not others. That is not the case. All students and their parents can qualify for these opportunities. • Preferred lenders on the financial aid award: Many schools will list their preferred lender on the award letter. These are private student loan lenders that the college has worked with in the past and has a good rapport with. However, you are not obligated to use these lenders. It pays to shop around, as lenders offer a variety of loan discounts that can save you hundreds or thousands of dollars over the lifetime of the loan.
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