When you get your financial aid award letter, your eyes may automatically scroll down to the bottom line—but that is a mistake.
Why? Because most financial aid award letters fail to give you the complete picture.
Here are three things that might not be obvious when evaluating your financial aid letters.
1. Gift aid may not be a guarantee
When evaluating the financial aid assistance the school is offering, it’s important to make sure you can count on that aid.
After all, a school that may look like a good deal at first can quickly become a bad deal if you're not guaranteed to get that aid every semester or school year.
If the school has a limited number of work-study positions available, you may not be guaranteed a spot. Therefore, you may not always be able to depend on those work-study funds to pay the tuition bill.
And even if you are granted a work-study position, remember that you won't be getting all of these funds at the beginning of the semester. Work-study money is disbursed via paychecks over the length of the semester.
Some schools also front-load their gift aid by offering grants or scholarships on the initial award letter that may not be available in future semesters.
It’s important to clarify with the school about when certain types of aid will be offered.
It’s also important to maintain the conditions that qualified you for the aid each year.
If you attend a school that is only affordable because of academic scholarships, it’s vital to maintain good grades in order to keep that funding and stay in school.
And if you receive need-based aid, a significant jump in your household income from year to year on the FAFSA could disqualify you from receiving the same aid on future award letters.
2. Your actual cost of attendance
Many schools will give you a number they call the cost of attendance (COA). Seems pretty straight-forward, right?
The problem is, that number rarely takes into account everything you'll be paying for.
What might be missing?
You might think this would be a no-brainer to include, but many colleges actually don’t include a tuition number.
Reason: some schools revise their tuition amounts over the summer and can't give an exact number until then. But ultimately, the reason why doesn't matter—you need this information to complete your funding plan.
If you can't find a tuition estimate from your school, our NitroScore tool can give you a ballpark number.
In addition to tuition, all schools tack on a variety of fees for facilities, student activities, and various other things.
When you're estimating your total costs, make sure fees are included and not just tuition.
Housing and Meals
While many schools do provide room and board cost estimates, not all do. That's especially true at colleges where many students commute from home or work full-time.
If you won't be living at home, you'll need to budget for your housing and food costs, too.
If your award letter doesn't include room and board as well as a meal plan, check with the financial aid office or the bursar's or business office to find out what it will cost.
If you won't be living on campus, make sure you know how much you'll need to budget for housing and food. Check out average local rents and line up roommates if you need to split the cost. And don't forget about the security deposit, utilities, and parking fees.
Book costs are included in some school award letters, while others choose to leave it out.
While there are ways to reduce your book costs, you won’t be able to avoid buying at least some books and supplies for classes.
That’s especially true if you're taking classes in the hard sciences, math, or business, where classes often require the newest editions and texts can costs hundreds of dollars a piece.
Depending on the courses you take, you may need more than just books for your studies.
Students in the sciences may need to purchase lab kits in addition to their books.
Those studying computer science, graphic design, and other tech fields may also be required to purchase a laptop to bring to class or to do homework.
And art students often need to purchase their own materials such as charcoal or clay.
Transportation costs are similarly omitted in some school award letters, especially at smaller regional schools.
If you're living off-campus, you’ll want to include daily commuter costs like parking and gas or a subway card in your financial picture.
And don’t forget transportation home during seasonal breaks and holidays, especially if you need a flight to get home.
If you live on campus, your school will likely require you to leave the dorms for Thanksgiving, between semesters, and for spring break, so you’ll need to have a way to get home.
3. Some aid must be repaid
Every school has their own language and abbreviations they use on their award letters and it's not always clear what's what.
For instance, a standard student loan can be called a subsidized or unsubsidized loan, a Stafford loan, or a Direct student loan. Sometimes loans may even be abbreviated as "ln" or "Stffd" or another term.
Other schools even group all types of loans with work-study and refer to the total amount as "self-help" aid.
Because of all this confusing language, many families understandably don’t initially realize the loans listed on their financial aid award letter must be paid back.
Federal student loans
Almost every student is eligible to take out a limited amount of federal student loans through the William D. Ford Federal Direct Loan Program.
For those with financial need, some or all of that balance may be subsidized, meaning that interest doesn’t accrue while payments are on hold during school.
Students who don’t demonstrate need typically can only take out unsubsidized loans.
In addition to federal student loans, award letters sometimes also list Perkins loans and/or Parent PLUS loans as funding options.
Perkins loans are another type of need-based loan. Though they often have affordable rates, they also must be paid back. You'll want to leave them out when calculating your true estimated costs.
Parent PLUS loans
Parent PLUS loans, as the name suggests, are loans taken out in a parent’s name. Many students without credit have their parents take out loans to cover their remaining costs.
But not only do these loans, like all others, have to be paid back, they also require a credit check and are therefore not a guaranteed option for every family.
The bottom line
Overall, make sure to keep loan offers separate from gift aid. Prioritize the aid that you won’t have to repay when comparing award packages from different schools.
And especially for families with strong credit, remember that there may be other loan options with more competitive rates.
See our picks for the best private student loans of 2018.