Your applications are complete. Admission and financial aid offers are starting to come in. It can be confusing to decipher exactly what portion of the awards are free and which come with a cost.
On average private colleges discount 46% of college tuition for first-year applicants. Wow, it sounds like a decent chunk of the cost, but every college–whether public or private–has a customized formula for awarding financial aid; every student is subject to a different amount.
A quick reminder: You must complete the FAFSA as well as the CSS Profile (for some colleges) to qualify for all available financial aid. Along with assessing your need-based aid it’s a requirement for many colleges–such as Stanford)–to apply for financial aid in order to receive an award letter.
Award Letters: The Equation
As you sift through financial aid award letters, it’s important to figure out exactly what your financial offer is. How much money must you pay back and what amount is handed to you for free?
This leaves you with your Out-of-Pocket Cost:
Total Cost of Attendance – Gift Aid (Scholarships + Grants) = Out-of-Pocket Cost
Note that if you research award letters, the terms Out-of-Pocket Cost and Net Cost are used interchangeably.
Keep in mind that:
- All freshmen qualify for $5,500 in total direct loans (unsubsidized plus subsidized).
- All college students qualify for Parent PLUS Loans up to the Cost of Attendance minus all other financial aid offered.
- There are private loans available today (most recently from credit unions) many which have more favorable features than the Parent PLUS Loan.
A nice free tool available to contrast costs is FinAid’s Award Letter Comparison Tool, which allows you to input information for 3 different colleges simultaneously.
- Add up all expenses: tuition, room and board, materials such as books, fees, and other necessities.
- Separate gift aid from loans.
- Double-check your net price. If the college lists a total, recognize that the college may figure in loans.
- Assess your out-of-pocket cost via the formula above, if a net price is missing.
While there are multiple factors to consider when choosing your college, it’s unquestionably important to understand the financial commitment you and your family will face.
Photo Credit: Matt Reinbold