If you’re heading to college this fall, you’ve likely received – or are about to receive – your first financial aid offer. Feeling confused? You’re not alone. Financial aid offers can be tricky to navigate, especially since every college presents them differently. But understanding these offers is key to making the best financial decision you can.
That’s why we’ve created this simple guide to help you break down and understand financial aid offers. Plus, discover a smart way to safeguard your financial future, no matter what life throws your way.
Step 1: Understand the Components of Financial Aid
Most financial aid offers are a mix of the following:
- Grants and Scholarships: Free money that doesn’t need to be repaid.
- Work-Study: An opportunity for you to earn money through part-time campus jobs.
- Loans: Borrowed money that must be repaid with interest. These may include:
- Federal Subsidized Loans: Government covers the interest while you’re in school.
- Federal Unsubsidized Loans: Interest accrues while you’re in school.
- Parent PLUS Loans: Taken out by parents that often carry higher interest rates.
Step 2: Compare the Total Costs
Each aid offer is tied to the school’s Total Cost of Attendance (COA), which includes tuition, fees, room and board, books, and other expenses. When comparing packages:
- Subtract Grants, Scholarships and Work-Study from COA: This shows the net cost you’ll need to cover out-of-pocket or with loans.
- Pay Attention to Loan Types: Look for subsidized loans first, as they have lower costs over time. Remember that parent PLUS loans and private loans carry higher interest rates.
- Look Beyond the Numbers: Review any conditions tied to scholarships, such as GPA requirements, to ensure your can realistically maintain them.
Step 3: Plan for the Long Term
- Estimate Future Loan Payments: Use loan calculators to see what monthly payments will look like.
- Evaluate All the Criteria: Don’t forget to evaluate criteria you won’t find on a financial aid offer, such as each school’s graduation rates, job placement stats, and starting salaries in your student’s field of interest.
Financial aid offers are more than just numbers – they’re a glimpse into the financial road ahead. By understanding how to break them down and taking steps to protect your family with tools like Student Loan Insurance, you can make confident, informed decisions about your child’s future.
