Dissecting Your Financial Aid Letter

College acceptance letters are coming in the mail and you are excited for your child to start their new adventure that can cost upwards of $100,000 or more over the next several years. As a parent you also know the need to figure out how to pay for this new adventure. With the FASFA completed, you now have the task of comparing acceptance letters with financial aid letters to determine which school will provide the best value.

Financial aid often creates better value for more expensive schools if they are providing more grants and scholarships for your child., Of course, it is tempting to go with the least expensive school but understanding financial aid letters is actually the key to choosing the most affordable school, among the colleges or universities your child has been accepted.

While there is no standardization among acceptance and financial aid letters, there are key elements that are common among them. Separating loans from free money and understanding out of pocket costs is explained in each financial aid letter.

Financial aid packages are offered for one year and, unless there is a multi-year scholarship in place, this amount can change significantly from year to year. Regardless of income, everyone should complete the FASFA because both federal and school financial aid use this form to determine eligibility for aid.

What Determines Financial Aid Eligibility:

    • Cost of attendance (COA). The school is only allowed to offer aid up to 100% of the cost to attend that particular school.
    • Household income. In cases of divorce, the custodial parent will complete the FASFA and use their family income, including step-parent’s income, if applicable. Schools might require non-custodial parental income, but federal financial aid does not.
    • Family size. In cases of divorce the custodial parent’s household is used.
    • Number of people in the household attending college.
    • Field of study. Grants or scholarships are available for specific degree tracks.
    • Participation in athletics.
    • Family background.
    • Scholarships and grants received outside the school you are considering.


Understanding the Financial Aid Letter involves evaluating its four key elements:

  1. Cost of attendance (COA) which includes tuition, fees, books, room and board, and anticipated living expenses.
  2. How much aid you are receiving will include grants, scholarships, work study, and student loans. Evaluating aid offered comes in two categories: Funds which must be paid back, such as student loans, and funds that do not require repayment, such as grants and scholarships.

    Work study programs offer the student an on campus job to assist with paying for living expenses. This money does not go towards tuition and fees.

    Student loans are either subsidized or unsubsidized, and must be repaid after graduation. Subsidized loans offer government payments for the accrued interest while your child is attending school.

  3. Expected Family Contribution (EFC) is the amount your family is expected to pay out of pocket for schooling.
  4. The Gap is any amount left over that you or your child must pay out of pocket. This can be part of living expenses, requiring the student to living more frugally to cover the difference. Other sources of funds might be through private loans or parent plus loans.

Decisions around financial aid could have lasting effects, as each year you will go through the process of evaluating out of pocket costs. If you have not created a college fund, borrowing more money may be required to assist with schooling costs. Your student can be part of this process and family conversation. Experts recommend the student have “skin in the game,” by working part time, or otherwise contributing to college costs.