FINANCIAL AID:A Guide to Evaluating a Financial Aid Award Letter

Receiving a Financial Aid Award LetterA Financial Aid Award Letter (FAAL) provides a student with a school’s cost of

attendance (COA) as well as the amount of aid available to the student

A student typically receives FAAL’s between March and April; a school will not

send a student a FAAL until he/she has applied for admission and been accepted

The FAAL explains the financial aid package offered and identifies the types and

amount of aid a student is eligible to receive from federal, state, and institutional

sources

A financial aid package is assembled by the school at which a student has been

accepted and serves to aid the student with his/her financial need

Financial need is determined based on a student’s Expected Family Contribution

(EFC), as well as a school’s interest level in that student

What Does a Financial Aid Award Letter Include?

FAAL’s will inform the student of how much financial support he/she will receive from

a school in the upcoming year

Financial support is provided in the form of grants, loans, scholarships, and work-

study

Grants: Classified as “gift aid” and is not required to be repaid. Grant examples

include Federal Pell, Federal Supplemental Educational Opportunity, institutional,

and state-sponsored

Loans: Loans must be repaid. Loan examples include Federal Perkins, Federal

Stafford, Federal PLUS, state loan programs, and private student loans

Scholarships: Classified as “gift aid” and is not required to be repaid. Scholarships

are provided by a school or private, third-party. FAAL’s should reflect both school-

funded and outside scholarships that have been reported to the financial aid office

Work-Study: Funds that a student can earn through on or off-campus employment

How to Evaluate a Financial Aid Package

• To evaluate a financial aid package, a student must analyze both the COA as well

as the amount of aid received

• A student’s Net Price, or out-of-pocket cost, is the difference between the COA and

the total gift aid (e.g. grants, scholarships, etc.). This figure represents the

amount that a student will need to pay either through personal funds or loans

• The financial aid package received is based on a one(1) year term. When

evaluating a financial aid package, the student should identify the average time it

takes to graduate, as well as the average indebtedness of a student upon

graduationTotal COA $42,000

Total EFC $20,000

Total Financial Aid Need $22,000

Gift Aid Received $15,000

Self-Help Aid Received $7,000

Net Price $27,000

Important Financial Aid Ratios & Terms

Grant to Loan Ratio: Identifies the strength of the financial aid package

received. A higher ratio means that the student is receiving more grant aid than

loan aid. Since grant aid does not have to be repaid, the highest ratio is also the

most desirable

Self Help to Grant Ratio: Identifies how much of the educational cost the

student will be paying through EFC, work-study, and loans. Since grants do not

have to be repaid, the lowest ratio is also the most desirable

Gapping: Occurs when there is a difference between the EFC and the COA. If

“gapped”, the student must evaluate whether or not he/she can obtain the

additional funds required to attend the school

Comparing Financial Aid Award Packages

School A School B School C

COA $25,000 $25,000 $25,000

EFC $5,000 $5,000 $5,000

Financial Need $20,000 $20,000 $20,000

Grants $5,000 $10,000 $2,000

Scholarships $5,000 $5,000 $1,000

Loans $7,500 $3,000 $12,500

Work-Study $2,500 $2,000 $1,500

Grant to Loan Ratio 1.33 5.00 0.24

Self Help to Grant Ratio 1.50 0.67 7.33

Gap $0 $0 $3,000

With the highest Grant to Loan ratio, the lowest Self-Help to Grant ratio, and no Gap, School B represents the strongest package for the student

Q. Did the student receive gift aid or self-help aid?

A. Gift aid is educational support that does not need to be repaid. Self-help aid is

educational support that is dependent upon a family’s financial need and is

required to be repaid. It is better to receive gift aid as compared to self-help aid

Q. How are loans structured?

B. When a student evaluates a loan package, he/she should consider the following:

• Interest Rates: With a variable interest loan, the rate and payment will

fluctuate with the market. With a fixed interest loan, the rate and payment

will remain unchanged

• Subsidized vs. Unsubsidized: The interest on a subsidized loan will be paid

by the government during both the deferment and grace period. The interest

on an unsubsidized loan accrues over time and is paid by the borrower once

repayment begins

Important Financial Aid Award Letter Q&A

What is the estimated increase in COA per year?

Does the school typically “front-load” grants? What % of students receive the same

amount of financial aid in latter years?

Does the school ever meet financial need in year one, and then “gap” the student in

future years?

Are there minimum GPA requirements, credit requirements, or service requirements

to maintain the current financial aid package?

How does the school handle outside scholarships?

If scholarships reduce the need-based portion of the financial aid package, will it

reduce the amount of grant money offered, or will it reduce the loan and grant

burden?

What are the details of the work-study program? What is the hourly rate? How

difficult is it to find a work-study position? Will work be on-campus or off-campus?

What is the financial aid appeal process?

Questions to Ask the Financial Aid Office

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