College Financial-Aid Offers: What Families Need to Know

By Veronica Dagher
As students’ college-acceptance letters arrive, their financial-aid award letters usually aren’t far behind.
The letters detail the financial assistance each school is offering. However, not every school uses the same format, which often makes the award letters difficult to understand and compare.
Here are seven common award-letter mistakes and advice from financial-aid experts on how to avoid them.

Confusing ‘net cost’ with ‘net price’

The “net price” of a school is the discounted sticker price—the total cost of attendance after subtracting grants, scholarships and other aid that doesn’t need to be repaid—says Mark Kantrowitz, publisher of, a website that connects students with colleges and financial aid. It is the amount of money families will have to pay from savings, income and/or loans to cover college costs.
Some colleges display a “net cost” figure on the letter instead, which subtracts the entire financial-aid package. But financial-aid packages often include loans, which don’t cut college costs and are instead “a way of financing the net price,” Mr. Kantrowitz, based in Chicago, says.
“Don’t accept the college’s math as is,” he says. Instead, do the math yourself as needed so you can look at comparable net-price figures for all the schools you are considering.

Underestimating total costs

Some costs may not be included in award letters. For instance, science classes may have lab fees and art classes may have materials fees, neither of which is typically included, says Deborah Fox, founder of Fox College Funding LLC in San Diego.
The cost statement may also include average costs for travel to and from the school that are far less than what a student who lives in a distant part of the country will incur, she says.
Consider also that a homesick freshman having a difficult time adjusting to college life might make extra trips home. And don’t forget the costs to the family if they will travel to visit the student at school.

Thinking the letter is for more than one year

Families often assume the aid they are given in the first year will be followed by identical amounts for the following three years of college. But some colleges may “front-load” grants, giving students more free money in their freshman year than subsequently, says Richard Polimeni, director of education savings programs at Bank of America Merrill Lynch in Pennington, N.J.
Families have to file for financial aid each year, and each year the college will send a new award letter. “Inquire if award amounts might change each year,” he says.
If the money is expected to decrease over subsequent years, it is important to create a backup plan to cover the remaining tuition costs, he says.

Assuming you must borrow that full amount

An award letter may show the maximum the student and/or parents can borrow in federal college loans, but it is also possible to borrow less or none, says Susie Bauer,senior vice president at brokerage Robert W. Baird & Co. in Milwaukee who works with college-savings programs.
“Don’t take it if you don’t need it,” she says. “Remember that generally by the time you pay off your student loans, you will have paid $2 for every dollar you borrowed.”

Counting on a work-study job

Colleges tend to award more jobs than they have federal funding for, figuring some students won’t follow through, says’s Mr. Kantrowitz. But in some cases, a school’s money runs out. A college’s allocation of federal work-study money could also be reduced in subsequent years. And the most desirable campus jobs may go quickly.
Students should have a backup plan for a job during the school year or on breaks if work-study income is less than expected. And apply for work-study jobs as soon as you arrive on campus, Mr. Kantrowitz says. You can’t apply before then.

Not understanding Plus loans

Colleges often include parent Plus loans—a federal loan available if parents pass a credit check and meet other criteria—in the aid package listed, says Troy Onink, chief executive of, a college-planning service in Russell, Pa.
Be aware that parental borrowers have to start making monthly payments right away. And with a current interest rate of 6.84% along with a loan fee of 4.27% on each Plus loan they take out, parents may want to think twice about using this pricey way to borrow, he says.

Accepting the financial package as is

If your family has unusual financial circumstances, appeal to the college for additional aid by providing the financial-aid office with documentation, Mr. Kantrowitz says. Unusual circumstances may include a job loss, the death of a wage earner or high medical expenses. Note any one-time income items that aren’t reflective of the family’s ability to pay during the award year, such as a conversion of a traditional individual retirement account to a Roth IRA, he says.
Call the financial-aid office to ask about the process for appealing for more aid. Some colleges have a special form, while others tell the family to write a letter.