How to Compare College Student Loan & Financial Aid Offers

School You Want, School You Can Afford

You’ve received your financial aid award letters from the colleges to which you’ve applied and been accepted. Now what? There are several different types of financial aid each is offering. How do you know which school’s package is right for you? What do all of the terms mean? Is one package better for you than another?

Here are the key components included in most college financial aid award letters:

  • Cost of Attendance
  • Expected Family Contribution
  • Federal Grants
  • Subsidized federal loan offer
  • Unsubsidized federal loan offer
  • Institutional grants and scholarships
  • Unmet need

Compare award letters the right way: understand what each of these components means and learn how to evaluate their differences and strengths.

Cost of Attendance

A college award letter should always give you the bottom line figure: the true cost to attend the college. This is not cost of tuition. Tuition is only part of it. Cost of attendance (COA) includes:

  • Tuition
  • Room and board
  • Books—estimated costs
  • Student activity fees
  • Any other fees required for attendance

All of these items should be clear and indicate the bottom line cost to go to a particular college or university.

Expected Family Contribution

The EFC is literally what the government has determined your family should financially be responsible for covering as part of your college expenses. This figure was disclosed on the SAR following your FAFSA submission, but most college award letters itemize this as part of the award letter or financial aid package.

Federal Grants

If you qualify for the Federal Pell Grant your award letter will indicate the amount for which you qualify. This is money you do not have to repay. However, Pell Grant funds are reserved for only the most financially needy students.

Federal Loan and Work Study Offers

The federal loans possible include subsidized Stafford Loans, unsubsidized Stafford Loans and Perkins Loans. Parents may be approved for a Parent PLUS Loan. Realize that you could be approved for a combination of these loans in varying amounts. For example, subsidized Stafford Loans are need-based; this means you may qualify based on a certain level of need, but you may also be approved for unsubsidized Stafford loan funds as well.

Perkins Loans are campus-based aid. Funds do not come direct from the federal government, but from campus coffers. If you are offered a Perkins Loan, you must understand that these funds are available on a first-come, first-served basis. You’ll have to make your decision sooner than later to tap into this low-cost loan.

Work Study offers mean the government has approved your financial situation for part-time, on-campus work so you can earn money to help pay for your education.

Institutional Grants and Scholarships

Many colleges and universities make very attractive offers to students. Grants and scholarships may be awarded based on need as well as academics, athletics, minority status, intended field of study, etc. Grant money and scholarships from a college or university are free money.

Unmet Need

This is an important figure on your award letter. Once the above components are itemized most college and universities indicate what dollar figure is still short of meeting the financial bottom line. Do you have financial options available that will let you overcome the unmet need, if necessary?

Comparing the Components

Almost every award letter you receive will likely itemize these financial components and none will be the same. Ultimately you want to determine two things: first, which award letter offers you the most affordable financial option, and second, is the most affordable offer from a college that one of your top choices?

Some things to consider:

  • Give greater weight to offers with higher grant and scholarship offers—again, it’s free money.
  • Subsidized federal loans are more affordable than unsubsidized because the federal government pays the interest that accrues while you’re in college.
  • In the case of offers with significant unmet need, can you afford the cost of a private student loan? If so, is it worth final cost of a private loan? Or are you more interested in a school that meets your full-need?
  • A school that meets your full need based on federal loans may ultimately cost you more money in the long-term then a school that offers significant grant and/or scholarship awards, but leaves an unmet need. Compare long- and short-term costs carefully.

When you compare college award letters you must account for any long-term interest rates attached to particular loans, and understand the terms of all institutional grants and scholarships – some are renewable, but contingent upon GPA and other requirements.

Once you’ve distilled the distinct financial differences, then really the final decision is about exactly where you see yourself being happy and successful. Compare carefully.