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Analyze Your Award Letter Before You Accept It!

Some colleges and universities are already sending out financial aid award letters for 2021/2022. That’s great news! After all, you’ve worked hard, and it’s time you reap the rewards of that hard work. But before you sign and return that award letter, it’s essential to look at it with a critical eye.  As we wrote in a previous blog, analyzing your award letters can be a complicated process, but it’s well worth your time.

Is your offer clear and easy to understand?

Some school financial aid letters don’t do a good job of differentiating among scholarships, grants and loans. Generally speaking, your letter will outline your merit scholarships, need-based grants, work study as well as student and parent loans.  But the way that information is presented can be confusing. A list of awards isn’t always broken out by type.

Sometimes, the word loan isn’t even used. When you think you’re getting help to pay for school, you may actually be getting aid that’s not going to reduce your actual cost at all. So, what looks like a great financial aid package on paper might have some hidden details that could end up costing you a lot of money.

Does your award letter list the Cost of Attendance or only Direct Costs?

There is no standard format for financial aid award letters. You may find that in comparing letters from different schools, that some details are missing, or labeled so differently as not to even suggest the same thing from one letter to another. Financial aid award letters may be based on direct costs instead of the real cost of attendance.

“Direct Costs” award letters are those that are specific to the school only. It’s typically just tuition plus room and board. “Cost of Attendance” award letters, however, take into account a student’s full financial obligation in attending a school, beyond tuition and room and board. It includes things like books and school supplies. It also includes estimated transportation costs, mandatory fees, and the student’s estimated personal expenses.

Is your merit scholarship renewable and under what terms?

Merit scholarships are popular among students because they don’t need to be paid back. They’re not always 4-year awards, though. They may be awarded in freshman year, with the possibility of that same award to be applied in subsequent years. Merit scholarships may need to be renewed annually, and the terms can vary widely, depending on the specific “merit”.

Academic merit awards may require a minimum GPA, which can change if your major changes. For some students, the issue is that college classes can be a lot harder than high school classes. What was a manageable GPA in the senior year of high school becomes unattainable in freshman year of college. Athletic merit scholarships are often tied to student performance in sports. An injury can sideline a career on the field and an education.

Finally, all merit students are typically subject to school rules; any infraction of the student handbook or other regulation could spell the end of a merit award.

Is your grant money being front-loaded?

Grant money may be front-loaded; that is, the amount of the award decreases after freshman year, if it’s renewed at all. A recent study showed that while three-quarters of freshmen received grant aid, only about one-third of upperclassmen also received grant aid.

There are a few reasons for this – and not all of them may be clear from your award letter. Sometimes, students may need to file certain paperwork or maintain a minimum GPA to keep a grant from one year to the next. Or, grants are simply used as freshman-year aid only, often called a bait-and-switch. It’s a tool that some schools use to make their financial aid package attractive to a prospective student, and persuade those who are indecisive. Once the student is enrolled, the school might not be concerned about renewing that grant for another year.

What about any fees that may not be listed in your offer?

Even when a financial aid award letter includes a full cost of attendance, including indirect costs, there are often things that don’t get factored into that, such as common fees. Some estimates of hidden costs can be several hundred dollars per month!  That adds up to a lot of money.

At many schools, the bill for a semester includes technology fees, activity fees, and extracurricular fees. Depending on their major, some students also see lab fees or studio practice fees. These expenses can make a big dent in a college budget, especially when you don’t consider them because they weren’t calculated in the cost of attendance.

Read carefully

A financial aid award letter can look like a dream come true. Don’t be dazzled by the numbers though – reading the fine print and asking the right questions is essential. These are just a few of the ways in which you can critically analyze your award letter to decide if it really does meet your needs. But it’s not a task you have to undertake alone!

Clients are encouraged to send their offer letters to us and we will be happy to help you make a determination on whether or not your offer is fair relative to the historical financial aid distribution formulas used by each college under consideration.

Billie Jo Weis

After receiving her BA in Accounting from San Jose State University and quickly attaining her CPA license, Billie Jo gained over 20 years of experience in accounting and finance at a variety of companies including Symantec Corp, Thomas Weisel Partners (a San Francisco investment firm), several Silicon Valley startups and at a Certified Public Accounting firm serving high net worth individuals with their taxes.

She has assisted hundreds of college-bound families with strategies on how to pay the least amount for college and she is also the Head of the Appeals Team.

Billie Jo Weis is a mother of three high school boys. With a passion for family success, she has devoted the past 15 years to her boys' athletic, social and academic lives, including volunteer work at her children’s schools with such programs as Junior Achievement.

Billie Jo is driven and passionate about helping families with financial strategies on how to find the most cost-efficient options to pay for college. With three teenagers in high school, Billie Jo knows first-hand the challenges and concerns of preparing for the cost of college.

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