How to figure out your financial aid award letter

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What each section of your financial aid award letter means.

It’s an exciting time: Your college acceptance letters and financial aid packages are rolling in. And if you’re like many other college-bound students, the overall price tag and the portion you’ll need to come up with are crucial factors in your college decision. That makes it all the more important that you fully understand what you’re reading in your financial award letters. Although many schools refer to this as your financial “award” package, it doesn’t necessarily mean it’s all free; loans and borrowed funds can also fall under that “award” umbrella.

Below, we’ll spell out what each section of your financial aid award letter means.


  • Tuition and Fees: Cost and fees for attending the school.
  • Room and Board: Cost for housing and meals on campus. Note that many schools offer a variety of meal plans at different price points.
  • Books and Supplies: Estimated cost for all materials you will need for classes.
  • Transportation / Personal Expenses or Miscellaneous: Not all schools include this estimate in the financial aid letter.

Types of gift aid

From federal grants to private scholarships, there are many types of gift aid. You usually don’t need to repay gift aid, unless you do not complete requirements, such as finishing the term. As your financial aid award letters come in, you may notice there is a difference in funding — that’s because not all schools receive the same funding (think private school versus public school). But certain grants, such as the Federal Pell Grant and certain state grants, are based solely on your Expected Family Contribution and thus won’t change from school to school.

Here are some types of gift aid you may apply for:

  • Federal Pell Grant: A program that provides need-based grants to students, but the amounts are based on your Expected Family Contribution (EFC), the cost of attendance, your enrollment status (full time or part time), and whether you attend for a full academic year or less. Financial need is calculated using a standard formula to evaluate the information collected from your Free Application for Federal Student Aid (FAFSA).
  • State grant: All states offer grants based on financial need specified in your FAFSA.
  • University scholarship: Any scholarship provided directly from your college or university. Be sure to understand any requirements associated with the scholarship, as some require that you maintain a certain GPA.
  • Restricted scholarship: Includes any scholarships awarded to you based on meeting certain criteria — anything from your ethnicity to your geographic location or programs of study.

Types of loans

Self-help aid requires some form of commitment from you, whether that is loan repayment or holding a job in the work-study program. Make sure you understand the details of your financing before you sign on the dotted line: This includes knowing what the loan covers, how much the interest and principal amounts are, and how much you’ll have to pay monthly after you graduate.

Here are some types of loans you may be able to receive:

  • Federal Perkins Loan: A low-interest loan with a fixed 5% interest rate. Your school acts as the lender, so repayments will go directly to the school. This is considered self-help; you will need to pay this back.
  • Federal Direct Subsidized Loan: Your school determines the loan amount, and the U.S. Department of Education pays the interest on the loan while you’re in school and for six months after you leave school This is considered self-help; you will need to pay this back.
  • Federal Direct Unsubsidized Loan: Operates just like the Federal Direct Subsidized Loan, except you are responsible for paying the interest on this loan. Interest begins accruing as soon as the loan is activated. This is considered self-help; you will need to pay this back.
  • Federal Work-Study: Financial aid you earn by working during the academic year, typically through a part-time position on campus. Though this is considered self-help, you earn this money, so generally there is nothing to repay. Income from this job does not count against your financial award for the following year. It’s important to note that work-study positions are not always guaranteed and can sometimes be first come, first served; be proactive in applying for a work-study position as soon as possible if you plan to take advantage of this self-help aid.
  • University Campus Loan: Any need-based loan directly from your college or university. This is considered self-help; you will need to pay this back.
  • Parent PLUS Loan: A federal loan available to parents of dependent undergraduate students. Parent PLUS loans have flexible loan limits. For the 2020–2021 academic year, the interest rate was a fixed 5.30%. This is considered self-help; your parents will need to repay this.

The bottom line

  • Cost of attendance (COA): This is an overall number based on tuition, fees, room and board costs (if you plan to live on campus), and weighted averages for other components, such as books, personal expenses, etc. This varies by school, but typically, all COAs will include these components. The COA is also the maximum amount of financial aid you could potentially receive. This is not the amount you will actually be charged to attend the school.
  • Total award: The total amount of aid you are eligible to receive from a combination of scholarships, grants, and loans. The best award would meet your full financial needs, primarily with funding from grants rather than loans.
  • Expected Family Contribution (EFC): After you’ve filed your FAFSA, the Department of Education uses a calculation based on income, household size, and other factors to generate your EFC, which determines eligibility for receiving federal and state financial aid. This is not what you will be expected to pay.
  • Need: COA – EFC = need. This is the number the school’s financial aid office will use to determine your need-based aid eligibility. There is need-based aid as well as non-need-based aid.

What will you pay out of pocket?

To figure out what you are responsible for, ignore the loan section and start by determining your net cost:

COA – gift aid = your net cost

Your net cost is more important than the COA because this is the amount you are responsible for providing. Your net cost can be paid from a combination of loans (federal or private), self-help (such as work-study programs), cash, savings, or other sources of income.

If all your gift aid, loans, and self-help options from your financial aid award do not cover your total financial need, you have a gap. You will have to come up with money to cover the gap, which you can do by taking out private loans, getting a part-time job (outside of work-study), or trying to reduce your college costs.


  • Net cost is more important than the overall cost of attendance. One school may have a higher COA but provide better aid through grants than a school with a lower COA. The net cost is the number you want to notice. Aim to get the best grant to loan/out-of-pocket ratio.
  • Be sure you understand which items are grants/scholarships and which are loans. Sometimes the title of each award is truncated, so be aware that “L” or “LN” may be used in place of the word “loan.” Similarly, “sub” or “unsub” may be used in place of “subsidized” or “unsubsidized.”
  • As of January 2021, the forbearance on student loan repayments due to the coronavirus pandemic ends on September 30, 2021. If you’re in college and already paying back loans, keep up with federal legislation regarding COVID-19 and your student loans. In the meantime, create a repayment plan.
  • Don’t be afraid to ask questions, but only ask qualified professionals, such as the financial aid staff at the college or university. Be cautious when relying on information you received from friends or others who have gone through the process.
  • Never pay for financial aid help; talk directly to the schools.
  • Pay attention to deadlines. Colleges and universities can have their own sets of deadlines, and they may vary by school.

Note: Be aware of some changes in the process starting in the 2021–2022 academic year.

Keep searching for scholarships throughout your college career — it’s not a one-and-done process. Search online for available scholarships through resources like TFS Scholarships; don’t just rely on what is listed on the college websites.

Want to read more about figuring out award letters?

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