In the Media

After the initial celebration of receiving college acceptance letters, it’s time to dig into the hard – and sometimes confusing – work of comparing financial aid packages.

As students pore over their financial aid award letters, there are some key figures to use to make a fair comparison. And while sometimes these numbers are itemized clearly on the letter, other times students may need to do the math.

[See how to map out your financial aid award letter.]

“A student might have a phenomenal award letter that’s very clear from an institution, and then they might have an award letter that’s highly confusing,” says Laura Keane, chief policy officer at uAspire, a Boston-based nonprofit that gives students information about affording college.

Consider these five important numbers.

1. Cost of attendance: The cost of attendance, or cost of education, for one year is a key starting point when comparing financial aid packages. Most schools will include it on the financial aid award letter, but some will not, and then it’s up to families to pull that figure from the college’s website or another resource.

“Sometimes people focus on total dollars in the aid package and don’t take into account the differences in the cost from school to school,” says Karen McCarthy, director of policy analysis for the National Association of Student Financial Aid Administrators.

Make sure you understand what that number includes. Some schools only include direct costs – bills you pay directly to the school, such as tuition, fees, and room and board – while others may add in indirect costs, such as books and transportation. Keane recommends focusing on direct costs as a starting point to compare.

“You need to look at the language to make sure you’re making an apples-to-apples comparison,” Keane says.

2. Free money: How much free money a student can receive is also a crucial figure. While some schools will break this out under a heading, sometimes calling it “gift aid,” others won’t.

The key words to look for on your financial aid letter are the terms “grant” or “scholarship,” since these signify the amount is money that doesn’t need to be paid back.

“You have to pay attention to the names,” McCarthy says. “Is this a loan or is this a grant? It’s really important to make that distinction between gift aid and non-gift aid.”

Aid that falls into this category includes income-based federal grants, such as Pell Grants or the Supplemental Educational Opportunity Grant, and institution-specific grants and scholarships. Some federal grants can vary from school to school depending on how the college chooses to administer the aid.

[Read about 10 ways to nab a scholarship to pay for college.]

Make sure to check out whether the grants and scholarships the school offers will be renewed after the first year, which may require a call to the financial aid office. The school may have requirements, such as maintaining a certain grade point average.

“Some institutions may have freshman grants that are specific just for that first year to try to make the package look appealing,” says Kari Gribble, financial aid director at Edgewood College in Madison, Wisconsin. “That’s where it’s really important for students to find out: Are these renewable, and if so what’s the criteria to make sure that happens?”

3. Net cost: The net cost is the cost to attend minus any gift aid – but this number will not necessarily be on the letter, so you may need to calculate it on your own.

Students will pay for the net cost through a combination of loans, work study and cash or savings.

“Within the net cost, there’s what you need to pay now and what you need to pay back later,” says Keane. “That includes different loans – money you need to pay back with interest over time.”

Use this tool from the Consumer Financial Protection Bureau to compare up to three financial aid letters.

4. Work-study: Work-study – a federal program that allows students to work while in school – could vary between institutions. Some institutions may receive more funds than another, and the way the school decides to award the funds may differ.

“The same student could end up with $1,000 in work study at one school and $3,000 at another one,” McCarthy says.

[Know how to make a work-study job pay off.]

5. Gaps or unmet need: Unmet need is anything you will owe after you’ve received all your grants and loans. This is also something that may not be on the financial aid award letter.

“That could be covered by a payment plan at the institution, or if the student is a dependent student, a parent loan might help to fill that gap,” McCarthy says. “But if there’s a gap there, you’ll want to pay attention to what are the options for filling that.”

Take care to check whether the school is including federal direct Parent PLUS loans – where the parent is the borrower – on the financial aid letter.

“Some institutions offer a Parent PLUS loan to fill that gap,” Gribble says. “They put that on the award letter so it looks like there’s no remaining balance due. They’re working under the assumption that a parent is willing to apply for that and will be approved for the loan.”

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