If you’ve applied for financial aid and filed all the paperwork by the appropriate deadline, an award letter outlining the college’s offer of financial assistance should arrive close on the heels of your notification of acceptance. The following should help you to understand what that package really means.
When comparing financial aid packages, the bottom line is the final cost of your education to you and your family. Since the total cost of education varies for each college, you’ll need to compare your packages in terms of several factors. First, compare the ratio of grants and scholarships (gift money) to loans for each school. Packages with larger grants than loans are obviously most desirable. Next, consider how much you and your family are expected to contribute and compare this amount to your total grant award. Are you and your family comfortable with your EFC—Expected Family Contribution? Will your earnings during college help toward meeting the expected amount?
Now, compare loan types offered and their terms. Student loans, in and of themselves, are not evil. Borrowing a manageable amount to cover college expenses can be a good plan. However, the key word is “manageable.” All loans are not created equal. The most desirable loans are subsidized student loans with low, deferred interest; these loans do not have to be repaid until after you have completed your education. Federal student loans tend to have the lowest interest rates and, for some types of Federal Student Loans, interest does not begin to accrue until six months after you graduate from college. Some colleges include private loans in their financial aid offers. The interest rates on private student loans are significantly higher than Federal student loans. Use caution when thinking about taking expensive private student loans, even for a “dream” college. You don’t want your future imperiled by large amounts of debt.
Most financial aid packages also include Work Study. Keep in mind that you are free to decline this type of aid; although there may be significant benefits to Work Study employment, some students prefer to find their own jobs on or off-campus. Earnings from Work Study, however, are not counted as income when you apply for financial aid for the following year, making Work Study a desirable form of employment.
For each college, add up the total for your EFC, loans, and Work Study in your financial aid offer and then subtract the total from your cost of attendance for the school. The result is your family’s total “out of pocket” cost for the college.
Call the college’s financial aid office to learn how outside scholarships may affect your financial aid package. While some colleges allow students to use these in place of loans, other colleges subtract this amount from any grant aid that you’ve been awarded. Ask, too, if you are likely to be awarded a similar package in succeeding years, assuming family finances remain at the same level. Some parts of your package may not be renewable, and this could affect your future cost of attendance.
The final decision about college choice needs to be a family decision, made by weighing numerous factors to determine the best choice for both you and your family. With skyrocketing college costs, finances may count heavily in your ultimate college selection.
