Financial aid awards come in all shapes and sizes. Unfortunately, so do financial aid award letters and comparing them can seem like comparing apples to hot dogs. Here are the key elements to look for:

  • Cost of Attendance. This should be at the top of the award letter and it– not the size of scholarships– should be your starting point in evaluating an award. Here’s an important point about cost of attendance: It’s probably the cost for the current year. Most colleges– especially public schools that depend on the state budgeting process to set tuition and fees– don’t set their prices for the coming school year until sometime in the summer.
  • Scholarships and grants. These are free money that will reduce your cost of attendance.
  • Loans. Your financial aid package can include Direct Student Loans and Parent Plus loans. Even though these can be included in your financial aid package, they don’t decrease your cost to attend; they just change when you pay the costs.
  • Work-Study. Work-study is awarded on the basis of need, and different colleges award work-study at different levels of need. Eligible students will see work-study on their award letter. Like loans, work-study doesn’t change your cost of attendance. It’s simply eligibility for a federally-subsidized job during the school year. You still have to find the job and work the hours to earn your work-study award.

When determining your net cost of attendance at a particular college, you should only subtract grants and scholarships from cost of attendance. Don’t subtract loan or work-study amounts. Here’s an example of an award offer:

In this case, the college is showing $27,800 of financial aid for the year, but $8,500 of that aid is loans and work-study. That means the student is really only getting $19,300 of free money. To determine their net cost, they’ll subtract $19,300– the free money– from cost of attendance.

This letter highlights another important consideration about financial aid awards: How do you renew them? In this student’s case, both a need-based grant and a merit-based scholarship were offered. They’ll reapply for the grant via the FAFSA, and the school is telling them that attending full-time and achieving a 3.0 FPA are required to renew the scholarship. Not all scholarships include that information, so you should ask if you don’t see specifics.

Cost of attendance also deserves a closer look, because different colleges have different views on what should be included. More on that here.

Here’s some other big news: I wrote a book! How to Pay for College will be available in stores in the summer of 2022. Over the course of going through material I had written for this site, I realized that I could also make this online content much easier to use. The end result of that (after a ton of work from my husband) is a new website, I’m moving this blog over there, too, which you may have noticed if you clicked on any of the links in this post. Please head over to the new site and subscribe over there so you won’t miss a post!