Late March and early April is happy season for college applicants. It’s when they receive letters of acceptance and financial aid offers from the schools that have admitted them. The happiest are those who receive more than one offer. But these students won’t simply be choosing the college they like best among the acceptances. First, they’ll calculate the net cost of each college by comparing financial aid offers. The outcome of this exercise will determine which college they’ll attend in the fall.

What Is a Financial Aid Offer?

Just as no two colleges are the same, neither are any two financial aid offers (also called Award Letters). Learning how to compare offers is key to selecting the college that best matches your needs and preferences.

After you submit your Free Application for Federal Student Aid (FAFSA) form, you’ll receive a Student Aid Report (SAR). Each college to which you apply will use this information to evaluate your eligibility for financial assistance. If they admit you, you’ll receive a financial aid offer from the college along with a letter of acceptance.

The aid offer enables you to determine the real cost of attending a college and provides the sources of funding you will be able to use to pay for it. An offer may include Federal and state grants, college-sourced (institutional) scholarships and grants, work-study programs, and student loans available from the Federal and state government or from the college itself. Read this information carefully. Your financial aid packages are created by each college for you as an individual based on your FAFSA and their cost of attendance. The types of aid and the amounts are likely to vary significantly from school to school.

Calculating the Net Cost of Attending Each College

If you are a student, take the following three steps to calculate the net cost of attendance at a college that has accepted you:

  1. The cost of attendance should be provided as part of the financial aid offer. If it isn’t there, it should be included on the College’s website. If not, ask the college’s financial aid office for this information. Make sure it includes amounts that would be paid directly to the school such as tuition, fees, and on-campus room and board. Colleges should also include reliable estimates of costs such as off-campus living expenses, books, supplies, equipment, and transportation.
  2. Subtract the grant and scholarship amounts on your aid offer from the total costs of attendance. Then subtract the amount of savings and investments that you and your parents intend to pay toward your costs for the upcoming academic year. The remainder is your net cost of attending that college. (It’s important to note that private, non-institutional scholarships awarded to you are not included in a financial aid. Colleges are probably not even aware of them, so you need to take them into account in determining your “net-net” cost of attendance).
  3. Compare the net costs for colleges that you are evaluating. The net cost is the amount that will need to be paid from your wages during the school year, your parent’s current income, or funds from loans that you may choose to take out.

Be Wary of Student Loans

Federal student loans from the U.S. Department of Education are more difficult to assess than other types of financial aid. Each loan program has different interest rates, fee structures, repayment terms, and options. Institutional student loans, which are offered directly by a college, have their own sets of rates, terms, conditions, and options.

If there’s a gap between the total financial aid available and the cost of attendance, a student may apply for loans from private sector financial services companies. A college’s offer may indicate how much you’re eligible to borrow from a particular private lender, but it won’t include the terms and conditions that will apply to you. Don’t expect them to be as attractive as those offered by government agencies or by the colleges themselves.

The Department of Education’s website at has a Loan Simulator that can help students calculate loan payments and choose the loan repayment plan that best meets their situation. Students can calculate the ramifications of borrowing different sums of money to pay educational expenses. The Simulator will recommend a repayment plan with options like the ability to make extra payments, to pay a loan off ahead of schedule, to consolidate loans, or to adjust payments to accommodate income level.

Gift Aid and Renewable Aid

Some of the aid in offers may be based on financial need. The Federal Pell Grant, for instance, goes to students with significant financial needs as ascertained by the FAFSA. Federal work-study programs, which allow students to earn a certain amount of money in a part-time job each semester, also go to those with financial need. These programs are known as “gift aid” in that they don’t need to be paid back.

Financial aid offers provide the cost of attendance for the upcoming academic year. A student may have three more years of undergraduate school beyond it, so it’s important to estimate the total cost of a bachelor’s degree. For each school being considered, determine which offers of grants, loans, and work-study funding are renewable as distinct from those that are offered only for the first year.

Be aware of renewal requirements. To stay eligible for Federal financial aid, for example, students need to make “satisfactory academic progress” while in school. This usually means maintaining a 2.0 GPA and completing course credits on time, although each school is free to establish its own standards. Private scholarships have their own criteria. Failure to understand and meet these requirements may result in the loss of a scholarship or other form of financial aid after the first year of an otherwise renewable program.
Look out for colleges that intentionally “front-load” their aid offers. They offer substantial aid in freshman year to attract students, but then reduce the aid in subsequent years. If not anticipated, such a reduction could leave a student unable to cover costs as a sophomore.

Appealing a College’s Offer of Financial Aid

If you aspire to attend a particular college whose financial aid offer falls short of your needs, you may unofficially appeal their offer and try to negotiate a better one. Update your FAFSA with relevant new information and then contact the financial aid office to discuss your situation. They may be influenced by a recent significant change in your financial circumstances such as a parent losing a job or the family suffering a major financial setback. Even the birth of a sibling may be considered to be grounds to review an aid offer. Although no college is obligated to take action on your appeal, it can’t hurt to ask.