How can students compare (and appeal) college financial aid offers?

A student compares financial aid offers

Just as no two schools are the same, neither are any two financial aid offers. Learning how to compare — and appeal, if needed — your award letters is key to selecting the school that matches your situation.

Choosing the right college is a big, and sometimes difficult, decision. You have many factors to consider during this hectic — and important — time. To ease your mind on the cost question, let’s break down your financial aid offers. Here, you’ll learn how to read, compare, and appeal the college financial aid offers you receive.

What is a financial aid offer letter?

After you complete and submit your Free Application for Federal Student Aid (FAFSA) form, you will receive a Student Aid Report (SAR). Each school you applied to will use your SAR to evaluate your eligibility to receive financial assistance. Then, you will get a financial aid offer letter from the school. It is usually included with the admission acceptance letter.

The financial aid offer letter outlines the total price of attending that college or university and the various sources of funding you could access to pay for it. Those sources could include things like scholarships, grants, a work-study program, and student loan offers.

Read the letter carefully. Pay close attention to which aid is from scholarships or grants versus student loans, because you will need to pay back student loans after you graduate.

What is an appeal and when does your financial aid offer warrant one?

In some cases, there might be opportunities to appeal financial aid offers with colleges. For example, you could appeal an award package if your personal or family financial situation has recently changed and, as a result, you and your family are not able to make the contribution you had initially expected. Perhaps your parents’ income dropped, you lost your part-time job, or your family’s house was in the path of a natural disaster. You could also appeal if you feel that the school is offering you less than it is offering other students in similar financial situations. Some schools may have an appeals process or forms available on the school’s financial aid office website. If not, reach out to the financial aid office via phone or email to learn more about how to appeal your financial aid award package.

“The appeal process itself should be done in an orderly and professional manner. Be sure you can present a logical front with plenty of reasoning for your argument. Keep in mind that some schools have a no-change policy once an award package has been delivered, and any appeal will likely be unsuccessful,” explains Richard Sorensen, president of Falcon Management, which runs TFS Scholarships.

In other cases, you might see a gap between award offers from two schools, particularly in offer components based on your merit as a student. Perhaps a larger merit scholarship is being offered by your second-choice school. You could reach out to the financial aid office at your first-choice school and tell them that you want to accept their offer of admission if they can match or come closer to the merit award offer from their competitor. “In my opinion, students should definitely appeal — financial aid offices don’t like the word ‘negotiate’ — their financial aid package under certain circumstances,” says Sorensen. (Get more of Sorensen’s tips on using scholarships to pay for college on CollegeSTEPS.)

Compare your financial aid offer letters

In most cases, you’ll want to compare the financial aid offer letters from each school that accepts you before considering an appeal.

When comparing letters, first make a note of the total price of each school. Then look at how much assistance each one offers — and, more importantly, what forms of assistance each offers.

Focus on grants and scholarships, because you won’t need to repay those. Anything else, such as a student loan, should be considered an expense (even if it’s listed under financial aid). Although loans can help you pay for school now, they don’t eliminate your costs. They just spread out those costs over time and add interest; you’ll still need to pay the loans back after you graduate.

To determine how much a college will actually cost you, subtract the amount of scholarships and grants from the total price. The remaining amount is what you need to cover through other means.

For instance, if School A’s price is $40,000 per year, and the college offers you a $10,000 grant and $30,000 in loans, your entire need for the year will be covered. But this is a loan-heavy offer.

On the other hand, if School B’s price is $50,000 a year, and they offer you $25,000 in grants and scholarships, $15,000 in loans, and $5,000 in a work-study program, you’ll be responsible for coming up with $5,000 on your own or with your family for the year.

Which is the better offer? Even though School B is more expensive and leaves a $5,000 out-of-pocket cost, you’d be borrowing half as much in loans as you would with School A.

Evaluate the loan offers in financial aid letters

In both examples, you may need to take out loans to meet your financial need. It’s critical that you understand specifically what to look for when comparing the loan options suggested in the financial aid award letters.

Look at whether the offer is for a federal student loan or if the school is suggesting that you or your parents take out a private loan. Federal loans typically have additional borrower benefits, such as deferment benefits, and more repayment options. Rates vary across both federal and private loan programs, so find the option that works best for you by talking to lenders as you are comparing your award letters.

You’ll want to look at the length of each loan term (most offer a 10-year repayment plan) and the interest rate of each.

The higher the interest rate, the more you’ll pay to borrow the money. You also want to find out if it’s a fixed-rate loan (all federal student loans and some private student loans have fixed rates) or a variable-rate loan (some private student loans have variable rates).

Interest on fixed-rate loans won’t change (hence, “fixed”), but be prepared for the interest on variable-rate loans to increase before you have finished repaying them. (For more information about the types of loans you can use to pay for college, check out our handy video guide here.)

If the gap between what you need and what you have is small, you might want to consider setting up a tuition payment plan with the school or take on a side gig to earn the additional amount. Be sure to ask yourself if there is a way to earn the money rather than taking on debt.

While taking on debt to pay for college is common, don’t forget that you must pay back loans. Ideally, your total student loan debt shouldn’t exceed the salary you expect to earn in your first year of work after college. One way to estimate your potential salary is by taking a look at the U.S. Bureau of Labor Statistics website.

Take your time reading and considering your financial aid offer letters and weighing them along with the other information you’ve gathered. Make the right choice for yourself now — and for yourself after graduation.

Once you’ve decided where you are going, check out our five-step guide to paying for college.

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