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How to Read a Financial Aid Award Letter
Financial aid award letters could have different language for grants, scholarships, work-study and loans.
Devon is a former personal finance writer for NerdWallet whose work has been featured in the L.A. Times, USA Today, Business Insider, CNBC and MarketWatch. She has a bachelor's degree in journalism from Boston University.
Des Toups Lead Assigning Editor | Student loans, repaying college debt, paying for college
Des Toups was a lead assigning editor who supported the student loans and auto loans teams. He had decades of experience in personal finance journalism, exploring everything from car insurance to bankruptcy to couponing to side hustles.
Anna Helhoski is a senior writer covering economic news and trends in consumer finance at NerdWallet. She is also an authority on student loans. She joined NerdWallet in 2014. Her work has appeared in The Associated Press, The New York Times, The Washington Post and USA Today. She previously covered local news in the New York metro area for the Daily Voice and New York state politics for The Legislative Gazette. She holds a bachelor's degree in journalism from Purchase College, State University of New York.
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Financial aid award letters will arrive soon after you receive your college acceptances. You need to decide which school gives you the best award package, but comparing offers can be a challenge. Every letter includes different language, formatting and content.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.69-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. As certified by your school and less any other financial aid you might receive. Minimum $1,000. Rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 9/3/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
Variable APR
5.59-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. As certified by your school and less any other financial aid you might receive. Minimum $1,000. Rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 9/3/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.69-15.49%
Lowest rates shown include the auto debit. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 9/10/2024. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Variable APR
5.54-15.70%
Lowest rates shown include the auto debit. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 9/10/2024. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Credible lets you check with multiple student loan lenders to get rates with no impact to your credit score. Visit their website to take the next steps.
A 2018 analysis of over 500 financial aid award letters by New America, a nonpartisan think tank, found numerous inconsistencies in jargon among the letters. And, more than one-third didn’t include any cost information alongside financial aid amounts.
To understand what each financial aid award letter says, you’ll need to cut through the clutter so you can make the best financial decision.
What your award letter should include
No two financial aid award letters will look alike, but they should have:
A list of the financial aid types and amounts awarded
Your awarded aid could include federal, state and institutional grants, as well as federal work-study and scholarships. The list will also include the amount of subsidized and unsubsidized federal loans you can borrow and, often, a PLUS loan your parent or guardian can borrow for your education.
The cost of attendance includes tuition, fees, and room and board for your first year. But it’s not complete. It doesn’t factor in everything you’ll pay for, or how many years you’ll attend.
Now that you know what to look for, here’s how you can use this information.
Determine the true cost of college
Only 40% of the sample letters analyzed by New America included a calculation of what students would need to pay. To figure out the cost of college yourself, here’s what to do:
Find the net price
The net price is calculated as the cost of attendance, including additional expenses, minus grants and scholarships. You can use a net price calculator, available on every college’s website. The net price includes estimated additional costs like books and supplies, personal expenses and transportation.
Think beyond year one
Net price factors in the cost of only one year in school. It also doesn’t take into consideration tuition increases, which are likely, based on data from the National Center for Education Statistics. Multiply the net price by four to get the total minimum cost you can expect. As tuition increases each year, your costs will go up, but your financial aid might not.
In a financial aid award letter, the way aid award money is labeled doesn’t clarify much. For example, work-study and loans may be referred to as “self-help aid,” while scholarships and grants may be listed as “gift aid.” In the New America study, among 455 colleges that offer unsubsidized loans, there were 136 unique terms for that loan, and 24 of those terms didn’t even include the word "loan."
Here’s how to tell the difference among aid types in your award letter:
Grants and scholarships: Awards that do not have to be repaid. These can come from the federal government, your school or your state’s grant agency. They may be need- or merit-based.
Work-study: Money you can earn, typically at an hourly rate, that’s funded by the government. It isn’t guaranteed: You have to find a qualifying work-study job that fits with your academic schedule, and the amount on your award letter is the maximum you can earn.
Loans: Borrowed money you must pay back with interest. You borrow federal direct loans from the government. These loans often have lower interest rates and more borrower protections than private student loans. And, no credit check or co-signer is required.
Once you grasp the cost and your financial aid options, you can more easily compare offers side by side to see which school will be the most affordable. This table shows you how you can compare costs and financial aid awards from two schools.
Financial aid comparison worksheet
Step 1: Calculate total cost of attendance (COA) Add tuition and fees + room and board + estimated books and supplies + estimated transportation costs + estimated personal expenses
School A
School B
Step 2: Subtract total money that’s free from COA. Add federal Pell Grant + state and institutional grants + scholarships + and military education benefits
School A
School B
Step 3: Subtract total money you work for from COA. Federal work-study + state work-study + institutional work-study
School A
School B
Step 4: Subtract total money you plan to borrow from COA. Federal direct subsidized student loan + federal direct unsubsidized student loan + federal PLUS loan (for parents and graduate students)
School A
School B
The amount left over is your total gap to fill. You can use savings, additional scholarships, or borrow private loans to fill the gap
School A
School B
If you didn’t get as much aid as you hoped from a school, you can write a financial aid appeal letter or consider a less expensive school.
Remember, you don’t have to take all offered financial aid, but make sure to accept all free aid before borrowing money.
