Financial Aid Award Letters – What You Need to Know

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Between now and mid-April, high school seniors and their parents eagerly await the arrival of the financial aid award letter. Once opened, they may appear to be straightforward. But, they may be anything but…

Surprising to most families, “financial aid” includes both free money (e.g., grants and scholarships that need not be repaid) and loans (i.e., money that must be repaid). So, even though the family may have qualified for financial aid, be absolutely sure you understand what aid has been awarded.

Merit aid, based on good grades, high test scores, artistic success, and/or star athletic performance, is free money. Schools use it to increase attendance. It may not automatically be renewed; you may need to maintain a specific GPA or meet some other requirement(s). And, what happens if it takes more than 4 years to graduate?

Need-based aid can be deceptive. A family must understand the Cost of Attendance (COA) and Expected Family Contribution (EFC), both of which are used to determine financial need. Each school determines its annual COA; the EFC is calculated pursuant to a legally-defined formula. Typically, the EFC is the minimum a family will be expected to pay; in fact, a family may be expected to pay much more.

If the student has applied to, and been accepted by, more than a single school (6-8 applications seems to be the “sweet spot”), it falls on the family to compare and contrast financial aid awards. Be sure you understand how to compare those awards effectively.

What happens if the school front-loads the award? Almost half of all schools provide more generous awards for freshman year than they do for sophomore through senior years. Yes, it’s a bait-and-switch. Unfair? Certainly. But, it is the school’s money. Do you know how to identify if a school is front-loading?

What happens should the student win a private scholarship? Legally, you are required to report any outside scholarships to the school. The school then decides how to revise the award. Some schools reduce the amount of loans included in the award letter, while others reduce the amount of free money awarded.

Don’t rely on an athletic scholarship. While approximately 4% of all high school athletes will compete in a sport at the collegiate level, only about 2% of high school athletes are offered an athletic scholarship. Moreover, the vast majority of scholarships are not full-rides. And, if you are one of the lucky few, the scholarship must be renewed each year by the coach.

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