How to compare financial aid packages in five steps

College acceptance season is an exciting time—high school seniors across the country find out which colleges and universities are offering them a spot and start making decisions about where to attend. A big part of that decision-making is based on the financial aid award letters that students also receive. These can sometimes bring stress and confusion since award letters can be difficult to decipher and vary from one school to another.

Financial aid award letters generally include grants, scholarships, work-study programs, federal student loans, and your Expected Family Contribution (EFC). Because each school uses its own template for award letters, it can be challenging to compare college costs apples-to-apples. But evaluating them doesn’t have to be complicated. Just follow these five steps.

Step 1: Understand the different types of financial aid

Your financial aid offer may contain a mix of different types of aid. It’s important to know the differences between these, since some will have to be paid back, while others will not.

• Grants & scholarships: Financial aid that does not have to be repaid (also known as gift aid).
• Federal work-study: A part-time employment program funded by the government that allows students to earn money that can then be used to help pay for college. The wages are paid directly to the student, and then used to pay for books and living expenses.
• Federal loans: These are designed to cover the gap between cost of attendance (COA) and other financial aid and must be paid back. Federal student loans are made by the federal government. If these aren’t enough to cover your costs, you may want to consider private student loans. These are made by banks and financial institutions and are not included in your award letter (you’ll have to pursue them independently).

Step 2: Carefully review each award letter

When you're ready to compare financial aid offers, first print all of your award letters and grab a highlighter or two. Carefully read each letter, highlighting each type of aid and the amount offered. You may want to use two different colors to highlight, one for loans that will need to be repaid and another color for scholarships and grants that do not need to be repaid.

Step 3: Compare financial aid award letters

Now that you have all the information in front of you, it’s time to compare your offers. There are tools, such as the Award Letter Comparison tool from Discover^® Student Loans, that can help guide you through this process. It is important to understand and compare the costs of attending each school, the various types of aid you are being offered (free money vs. money you must pay back), and how much money each school expects you and your family to contribute to your education.

When comparing the cost of attendance (COA), take note of these numbers. They may not all be listed on every award letter, but it’s important to know the full cost associated with attending each school, so do a little digging if you have to.

• Tuition and fees
• Room and board
• Travel/transportation
• Books and other expenses

You’ll also want to compare the various types of aid being offered, such as:

• Grants
• Scholarships
• Work-study
• Federal loans

Step 4: Find out how long the financial aid will last

Financial aid offers typically cover only one year in school, so families must complete the Free Application for Federal Student Aid (FAFSA^®) every year. Some forms of aid like scholarships or grants may be guaranteed for four years, though most are only guaranteed for the first year. Families should ask the college’s financial aid office about the likelihood of aid being extended and get the answers to their questions in writing.

Step 5: Research other funding sources

Students can and should continue applying for outside private scholarships throughout their time in college, since that is free money that doesn't have to be paid back. Leverage scholarship search tools to help you find them, such as our Free Scholarship Search.

Keep in mind that when you compare schools, costs aren't the only factor. You should also consider location, academic rigor, graduation rate and employment rate, as well as things like campus culture. (A college campus visit can be really helpful.) The right school for you is the one that will give you the best combination of education and experience, while leaving you with the least amount of debt.

^{FAFSA® is a registered trademark of the US Department of Education and is not affiliated with Discover® Student Loans.}