Make it Make Sense: Understanding Financial Award Letters

As seniors receive their acceptance letters and celebrate their entrance into colleges and universities, the next step is to decipher their financial aid award letters to decide which college is the most affordable. It’s no secret that college is expensive, so correctly understanding a financial award letter is crucial to the student making a wise educational investment. Already an infamously complicated and confusing process, the New FAFSA brought more challenges for students, educators, and colleges in the financial aid process. As educators, teaching financial literacy to students is pivotal to ensure that they are making the best financial decision for their college future.

In this blog, we will explain the moving parts of financial award letters, while offering tips on how to better understand a financial award letter so students and their families can make more informed decisions about college financing.

Key Takeaways

• Financial Award Letters Are Not Standardized – Each college formats its award letter differently, making it hard for students and families to compare offers easily.
• Know the Key Terms – Understanding key components, like COA (Cost of Attendance), SAI (Student Aid Index), loans vs. grants, and out-of-pocket costs, is essential for informed decisions.
• Loans Should Be the Last Resort – Students should be cautious with Parent PLUS and private loans due to high interest rates and early repayment expectations.
• Estimate Real Costs – Encourage students to calculate their estimated out-of-pocket costs with and without loans and to plan for both direct and indirect expenses.
• Aid Can Be Appealed – If circumstances change or errors occur, students can appeal for additional aid—ideally with proper documentation and within deadlines.
• Support Through Verification Is Crucial – Aid verification can be daunting, and students need guidance to gather required documents and meet deadlines.
• Tools + Trusted Adults Matter – Use tools like DecidEd, the OneGoal curriculum, and support from Program Directors and counselors to navigate the process.

What is a
Financial Award Letter?

A financial award letter is a document provided by a college or university’s financial aid office that details the financial support a student is eligible to receive to help cover the cost of their education per school year. It can also be referred to as a “student aid package.” The purpose of the financial award letter is to provide a clear understanding of the financial aid package being offered, helping the student and their family make informed decisions about financing their education. This aid helps students budget for the school’s expenses by estimating their out-of-pocket cost after deducting loans, grants, scholarships, and other aid. Students typically receive this package some time after receiving college acceptance letters, which could be mailed, emailed or found in the student’s college portal.

TIP:

Because there are multiple ways a college will send the letter, students should continuously check their email, mailbox, and student portal. When a student is accepted into a college, they should set up a student portal even if they haven’t committed to the school. Since there is no exact date on when each package is delivered, students should expect to receive the aid after receiving acceptance from the college. This could be anywhere from one month to four months after.

TIP:

Direct Costs are paid directly to the university. These would be tuition, fees, room and board.

Indirect Costs are not directly paid to the university. These would include books, supplies, transportation, and personal expenses. Although not paid directly to the university, it is important that students also plan to cover these expenses.

Grants and Scholarships:

These are forms of aid that do not need to be repaid. They can come from federal or state governments, the college itself, or private organizations.

Federal Work-Study:

This program provides part-time jobs for students with financial need, allowing them to earn money to help pay educational expenses.

TIP:

Students must apply for work-study jobs through the college’s financial aid office, and the number of hours a student can work per week is capped. Not all financial award letters offer this type of aid in their package as it is dependent on the student’s financial need. Also, this award is paid directly to the student in the form of a paycheck and should not be counted towards the overall financial aid award. It is generally not a large amount and is more useful as everyday spending money for the student.

Loans:

These are funds that need to be repaid, usually with interest. The letter will outline different types of loans available, such as federal student loans (e.g., Direct Subsidized Loans, Direct Unsubsidized Loans, PLUS Loans) and private loans.

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Private and Parent Plus Loans are not recommended. High interest rates combined with a quick turnaround into the repayment period can make these types of loans a burden for families.

Student Aid Index (SAI):

This is a measure of a family’s financial strength and is calculated according to a formula established by law that considers the student’s FAFSA information. A student’s SAI is used to determine eligibility for federal student aid and helps the college determine how much financial support a student may need.

SAI is not:

• A dollar amount of aid a student receives,
• What a family is expected to provide, or
• A final financial aid offer.

TIP:

Learn how the SAI is calculated.

Out of Pocket:

This is the COA minus the total financial aid offered, giving an estimate of what the student and their family are expected to pay out-of-pocket.

Estimating Out-Of-Pocket Cost

With Loans

(Direct Costs + Estimated Indirect Costs) = Cost of College

(Grants + Scholarships + Loans)  = Aid Offered

(Cost of College – Aid Offered) = Out of Pocket Cost for Student

Without Loans

(Direct Costs + Estimated Indirect Costs) = Cost of College

(Grants + Scholarships)  = Aid Offered

(Cost of College – Aid Offered) = Out of Pocket Cost for Student

Example

+$25,000 – Cost of College

-$12,250 – Aid Offered

= $12,750 – Out of Pocket Cost for Student

Comparing award letters is a uniquely individual process that must take into account the financial situation of the family and the future plans of the student. A financial aid award letter details the cost and the aid for only one academic year. Financial considerations must  take into account the overall length of time that the student will spend in college. What is affordable for one year must be affordable for two, or four years, depending on the college degree the student is pursuing. Also, students may have different needs when it comes to Indirect Costs, given that this category can include transportation and personal expenses. Educators should patiently and wisely help a student during this process.

In our blog post “Ricardo’s Road to Success,” Ricky shared that he had to leave NWU after a year due to financial constraints. His out-of-pocket cost was too expensive and he didn’t want to take out loans. The opportunity for his well deserved education came with a heavy price and this was heartbreaking for Ricky.

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The cost of college is not difficult to determine, so students should start by calculating the aid offered. Colleges will offer different amounts and types of aid, which can be the most challenging part to estimate. Ultimately, it is the student’s decision to accept loans, which can alter the out-of-pocket cost.

Aid Verification

Aid verification is a process used by colleges and universities to confirm the accuracy of the information provided by students and their families on FAFSA. Verification ensures that students receive the correct amount of financial aid for which they are eligible. Students could be selected randomly or based on any discrepancies flagged on FAFSA.

If a student is selected, here is the documentation generally required for verification:

• Tax Returns: Signed copies of federal tax returns for the student and parents (or IRS tax return transcripts).
• W-2 Forms: Wage statements from employers.
• Verification Worksheet: A form provided by the institution to gather necessary information.
• Other Documents: Proof of untaxed income, household size, number of family members in college, etc.

The financial aid office will compare the submitted documents with the information on the FAFSA and students will receive an updated financial aid award letter reflecting any changes.

TIP:

Not all colleges will ask to verify a student’s financial aid, but when asked, it is vital for a student to respond promptly. Students should also keep copies of all submitted documents and communications for their records.

Accepting, Declining, or Appealing
Financial Award Letters

Declining a financial award letter or specific components of a financial aid package is a straightforward process. Many schools allow a student to decline financial aid online through the student portal. It is usually the loan type or loan amount that will be declined.

Accepting a financial award is usually done through the student portal.

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Students should keep in mind that there are deadlines for accepting a financial award letter.

A student might appeal a financial award letter for several reasons:

• a change in the financial circumstances of the student or family,
• the cost of attendance was miscalculated,
• another school offered more aid,
• relevant financial factors not considered in the FAFSA, like costly medical bills the family has paid,
• the information on FAFSA was incorrect or incomplete,
• a student improved their academic performance or had new test scores that were not available when the initial award was made.

If done correctly and in a timely manner, appealing a letter can have its benefits if more aid is offered. Students should review the college’s appeal process because every school differs. Some may simply require a letter and supporting documents while others might ask students to fill out a particular form or take other defined steps.

Resources + Tools

Financial Fit is one of the four components in OneGoal’s Quality Enrollment framework. During the second year of the program , the OneGoal curriculum includes lessons on how to evaluate and compare financial award letters. There are several resources online, but learning the terminology and showing students how to make informed decisions is key. Teachers take the time to guide the students through this process and use DecidEd to assist students and their families.

There are also spreadsheets a student can use or financial award letter calculators to give families an estimate of the college costs to determine their out-of-pocket cost. High school counselors are experts in this field and should help students and their families throughout this process.

Q&A

Q: When should I expect to receive my financial award letter after being accepted?
A: Typically 1–4 months after acceptance. It may arrive via email, mail, or the student portal—so check all regularly.

Q: What if two schools offer very different types of aid—how do I compare?
A: Start by calculating your out-of-pocket cost for each using total aid (excluding loans if possible) subtracted from the cost of attendance.

Q: Can I decline certain parts of the aid package, like loans?
A: Yes! Most colleges allow students to accept or decline individual parts of their aid package through the portal.

Q: What is the SAI, and why is it important?
A: The Student Aid Index is calculated from your FAFSA and helps colleges decide how much aid you may need. It is not the amount your family is expected to pay.

Q: What if I made a mistake on my FAFSA or had a family financial emergency—can I request more aid?
A: Yes, through a formal appeal. Provide supporting documents and follow the college’s appeal process carefully.

Monica Selagea grew up in Chicago and attended Columbia College in Chicago and DePaul University. She is currently a high school teacher in Chicago and a Program Director for OneGoal. She also teaches at the City Colleges of Chicago.

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