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It's the time of year when high school seniors across the country receive financial aid award letters from the colleges and universities to which they've been accepted. It's an exciting time, but one that sometimes brings stress and confusion, especially since award letters can be difficult to decipher.

Financial aid award letters generally include grants, scholarships, work-study programs, federal student loans and your Expected Family Contribution (EFC). Families may need to take out private student loans to fill any gaps between the financial aid provided and their EFC, but such funding isn't clearly noted in the award letter. Because each school uses its own template for award letters, it can be challenging to compare college costs apples-to-apples.

Here are a few tips to help you compare financial aid award letters.

Step 1: Understand the Different Types of Aid

There are different types of aid you can be offered in your Award Letter, all of which will help you financially in different ways:

  • Grants & scholarships: Financial aid that does not have to be repaid (i.e., gift aid).
  • Federal Work-Study: A part-time employment program funded by the government that allows students to earn money that can be used to help pay for college. Generally the wages are paid directly to the student and used to pay for books and living expenses.
  • Federal Loans: Are designed to cover the gap between cost of attendance and other financial aid and must be paid back. There are two categories of student loans: federal and private. Federal student loans are made by the federal government and are included on your award letter. Private student loans are made by banks and financial institutions and are not included in your award letter. Keep in mind that some student loans charge a fee, which may be deducted from each disbursement, so you'll receive less money than you borrowed.

Step 2: Carefully Review Each Award Letter

When you're ready to compare financial aid, first gather all of your award letters and a highlighter. Carefully review 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 Award Letters

There are tools, such as the Discover Student Loans Award Comparison tool, that can help guide you through the process of comparing your award letters. It is important to understand and compare the various types of aid you are being offered (free money vs. money you must pay back) and the potential contribution you will have to make for your education.

Step 4: Calculate Your Costs

Once you breakdown your awards, families can make a more informed decision about how much each school will cost.

To determine the true cost of college, you need to know the net cost, or the costs you need to cover after taking into account funding sources that do not have to be repaid.

Net cost is a much more accurate basis for comparing award letters because it identifies colleges with more generous financial aid packages and shows families what their actual out-of-pocket costs will be.

When you look at the net cost, you may find that a school with a much higher annual cost of attendance could actually be the more affordable option if it offers more financial aid in the form of scholarships, grants and other free money.

Step 5: Know 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 to apply for more. There may be some aid like scholarships or grants that is guaranteed for four years, though most are not guaranteed beyond the first year, so families should verify and get the answer in writing.

Step 6: Look Into Outside Scholarships

Students can and should continue applying for outside private scholarships since that is free money that doesn't have to be paid back. Leverage scholarship search tools, such as the college scholarships resource offered by Discover Student Loans, to help in your search for these scholarships.

Keep in mind that when you compare college costs, price isn't the only factor. You should also consider location, academic rigor, graduation rate and employment rate. Pick the school that will give you the best combination of education and experience and leave you with the least amount of debt.


FAFSA is a registered service mark of the U.S. Department of Education and is not affiliated with Discover Student Loans.

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