How to Read Your Financial Aid Award Letter


Reading – and understanding – your financial aid award letter is a key part of assessing the cost of your college education. Unfortunately, there’s no standard format and with lots of jargon, financial aid award letters can be difficult to understand. Add to that offers from multiple schools and it can get confusing quickly.

To simplify the process, let’s take a look at how to read your financial aid award letter to better understand your financial aid package.

What Is a Financial Aid Award Letter?

A financial aid award letter is the notification that students receive informing them how much financial aid a school is willing to offer.

All students that submit a Free Application for Federal Student Aid (FAFSA), were approved for aid, and accepted by a school will receive a financial aid award letter from that school. You may find that this notice is referred to by names such as “financial aid offer,” “FAFSA award letter,” “financial aid award letter” or “financial aid package,” but they are all basically the same.

For help with filing your FAFSA, click here.

When Will the Financial Aid Award Letter Come?

A financial aid award letter is often received around the same time as college acceptance letters. This can vary depending upon the timing of your FAFSA submission and each school’s administrative process. In general, financial aid award letters are sent starting in February each year. Financial aid award offers are only for one year of school. You’ll need to complete the FAFSA every year to determine what aid you are eligible for and you’ll receive a new financial aid award letter every year with that corresponding FAFSA submission.

Since there is no standard format used by all schools, we’ll address the most important elements typically included in the letter.

Key Components and Definitions to help understand your Financial Aid Award Letter

The first step to reading a financial aid award letter is to understand the elements they include. The recently simplified FAFSA is now easier to complete and introduced new terminology. Familiarizing yourself with the new terminology is essential in knowing how to read and understanding your financial aid offer. Here are the main parts to look for:

  • Cost of Attendance (COA): A school’s cost of attendance, (COA) will also be included in your financial aid award letter. Schools are required by law to have an official COA, which is the estimate of what it costs to attend their institution for one academic school year. It usually includes average tuition and fees, food and housing (formerly referred to as room and board), transportation, and supplies. It’s just an estimate and is not what will appear on your actual tuition bill.
  • Student Aid Index (SAI), formerly known as Expected Family Contribution (EFC): Based on information provided in your FAFSA, the government will determine your SAI. This number will determine how much federal aid you would receive if you attended that school. A lower SAI number indicates more financial aid is needed.
  • Financial Need: Financial need is the difference between your ability to pay for college and how much it costs to attend. Your financial need is determined by subtracting your SAI from the COA.
  • Gift Aid: Gift aid is money that students don’t have to pay back and can come as grants or scholarships. Your financial aid award letter will identify which types you’ve been awarded and how much you will receive.
  • Work-Study: Work-study programs provide you with part-time work on or near campus. Work-study programs are funded by the federal government but are operated by schools.
  • Student Loans:Financial aid award letters communicate which federal loans you qualified for. Student loans are financial aid that students typically must repay with interest. You can choose to accept or decline them.

While your SAI is an index number determined by your FAFSA, your financial need is not. This can vary greatly, as depicted in this sample scenario:

University A University B
Cost of Attendance (COA) $20,000 $40,000
Estimated Family Contribution (EFC) $12,000 (fixed) $12,000 (fixed)
Your Financial Need $8,000 $28,000

University B is clearly more expensive than University A, leaving the student with greater financial need. But when the schools’ financial aid award offers are compared, the more expensive school becomes less expensive to attend:

University A University B
Your Financial $8,000 $28,000
Your Financial Aid Award $4,000 $26,000
Your Financial Aid Gap (Unmet Need) $4,000 $2,000

Once the details surrounding the amount of financial aid are received, you can compare offers from different schools by using a financial aid calculator.

How to Compare Financial Aid Award Letters

You may have received multiple financial aid award letters and now it’s come down to which school will offer the most aid. To determine which school is the most affordable, you’ll first want to calculate the total cost of attendance (COA). This should be available in your financial aid award letter but if not, simply add up the cost of tuition, books, fees, food and housing, supplies, transportation and personal expenses. Next, subtract any grants such as federal Pell grants, scholarships, military benefits and state or institutional grants. Then subtract any money that will be earned through a work-study program or other federal or state-granted aid. That will give you the amount leftover needed to fund your academic year that can be used to compare to other schools.

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After the First Year

It is important to remember that it is common that tuition fees, and costs for housing increase each year. It can be easy to forget this when calculating out the total cost of college expenses. Be sure to take these increases into account when you are looking at your financial aid award letter, as often the expenses will increase while financial aid doesn’t.

Understanding College Financial Aid Packages

To fully understand the financial aid package being offered by a school, students must look beyond the basics contained in the financial aid award letter. There are significant costs that can be easily overlooked.

The university’s financial aid officer listed in your offer letter should be contacted to collect additional information like:

Additional Costs

The Cost of Attendance (COA) calculation can vary between universities. Make sure that all potential costs are included like: housing, food, transportation, books, supplies, additional fees, and other living expenses.

Out of state students should also consider travel expenses which are commonly overlooked.

Scholarship Terms

If scholarships are offered, learn as much as possible about what they include. For example:

  • Will the scholarship renew every year?
  • Will it renew at the same amount?
  • What are your responsibilities to maintain it?

Although it’s not fun, consider worst-case scenarios when evaluating scholarship terms. For example, will an injury void an athletic scholarship?

Click here for a complete guide on scholarships.

Loan Terms

Financial aid award letters may include federal student loans and the related terms. You may choose to accept or decline these loans. Those students considering these financing options should carefully review details such as:

  • What is the interest rate?
  • Are there any additional fees aside from the interest rate?
  • How soon will repayment begin?
  • When will interest start accruing?
  • What is the length of repayment?
  • What will the monthly payment be?

Work-study Program Terms

If work-study opportunities are included in the financial aid award letter, ask the admissions counselor:

  • What jobs are available?
  • What’s involved with getting accepted to the work-study program?
  • What is the compensation rate?
  • What are the hourly work requirements?
  • Are the jobs on or off campus?

Financial Aid Letters: Next Steps

After gathering the necessary information and performing the comparison, the next step is to make a decision. Congratulations!

Once you’ve made your decision, follow these three steps.

  1. Contact the selected school to get details on formally accepting the financial aid award, including deadlines and instructions.
  2. Contact the other schools to decline their offer.
  3. Complete and submit any additional paperwork, such as loan documents if you accept any federal loans.

When Financial Aid Isn’t Enough

Still need more money for college? After exhausting all scholarships, financial aid, and federal student loan options, it is common that there are still college expenses that aren’t covered. College Ave offers private student loans with competitive rates, and many different loan options and repayment plans. College Ave also has a monthly scholarship that could help you cover any leftover expenses. Enter for a chance to win our monthly scholarship sweepstakes1 or apply for a private student loan.

1 No purchase necessary. Odds of winning depend on the number of entries received. For a complete list of rules, click here.


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