Comparing College Financial Aid Offers
After months of anticipation, your child’s college admissions decisions have arrived with great news. Congratulations! But, before making a college choice, many families still have one more very important thing to do: compare the financial aid offers from all of the colleges to which their student has been admitted.
Your family should receive financial aid and scholarship offers from your child’s colleges by April 1. If you have not received a financial aid offer from a college to which your child has been admitted to by the first week in April, call the financial aid office immediately to find out why. Don’t put this phone call off!
Once you have received all of your child’s financial aid letters, the following three-step process can help your family accurately compare the offers and make a smart decision about which college to attend.
Step 1: Determine your total cost of attendance for each college
While colleges provide estimates covering tuition, room, board, fees, and additional costs like books and personal expenses, these may not align with your family's actual expenses. Certain majors or distant locations may incur extra costs (e.g., lab fees, and travel expenses). Research specific factors like airfare, major-related expenses, and local living costs. Don't rely solely on the college's estimate; create your own "estimated total cost of attendance" for accurate comparison when evaluating financial aid offers.
Step 2: Compare your family’s out-of-pocket costs for each school
Every college expects each family to contribute something to their student’s education. To make sure you’re accurately comparing what each college will cost your family, compare each of the following items from each financial aid letter one by one:
Student Aid Index (SAI):
The SAI has replaced the EFC (Expected Family Contribution). Though similar to the EFC, the SAI figure is used as a guide to determine how much aid a student is eligible to receive. This figure is determined by the sum of parental and student income and assets.
Student Loans:
Most financial aid offers from colleges will include student loans. You may choose to turn down loans or only accept part of the loan amount offered. Borrowing a manageable amount to cover college expenses can be a good plan. However, the keyword is “manageable.” All loans are not created equal. 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 considering taking expensive private student loans, even for a “dream” college. You’ll want to carefully consider the types of loans each college has offered you and make sure you and your child understand the full cost of each loan, including loan origination fees and interest costs over the life of the loan.
Parent Loans:
To help parents pay their expected share of college expenses, the Federal Government offers loans for parents called PLUS loans. PLUS loans, if used wisely, can help cover your family's SAI if you do not have savings or income to pay the full SAI, but keep in mind that interest and monthly payments begin as soon as you sign for a PLUS loan. Again, you can turn down any PLUS loans in your financial aid offers, but you will need to make up the difference out of pocket. Make sure to understand the terms and interest rate if you do borrow.
Federal Work Study:
Federal Work Study helps cover personal expenses and books by providing on-campus jobs. Students earn up to the awarded amount, contingent on finding a work-study job and working sufficient hours. Failure to meet the criteria affects the financial aid offer. Work Study funds are not available until the student begins working. Despite this, it offers valuable resume-building opportunities. Research indicates that students working 10-15 hours per week, the typical work-study commitment, often achieve better grades. Calculate the total of SAI, loans, and Work Study for each college, and subtract from the cost of attendance to determine the family's "out-of-pocket" cost.
Step 3: Consider the “free” money in each financial aid offer
After assessing out-of-pocket costs, focus on the "free" money offered by each college, such as grants and merit scholarships. Grants act as a discount on total attendance costs and don't require repayment. Be aware of GPA requirements for scholarships. However, don't base decisions solely on grants and scholarships; prioritize total out-of-pocket costs from Step 2. The college with the most significant scholarship may not be the most cost-effective. Comparing offers accurately is crucial for an informed decision. Contact financial aid offices for clarification, and once you determine costs for four years, make a family decision for the most sensible choice.
