Now that we are well into spring, it is that time of the year for seniors and their parents to receive college financial aid award letters. Of course, with the costs of colleges as they are, these official award letters offer critical pieces of information to help families determine their final college choice—a decision that must be made by May 1st.
Follow these five steps as you read your college award letter (or look to the sample award letter provided below) to ensure that you understand the exact amount each college will cost.
Your award letter will likely list 2013–2014 Cost of Attendance figures. Remember that Cost of Attendance (or sticker price) takes all potential college costs into account, including:
Many colleges also list your family’s direct costs. Direct costs do not include the figures that vary by student, such as books and transportation. Direct costs might include tuition, fees, or room and board (if a student plans to live on the college’s campus).
To determine what you are actually going to owe a college, take these direct costs and subtract any grants and/or scholarships listed on your award letter. This becomes your net price, before any student loans and campus employment are taken into account. If there are no grants and scholarships, your direct costs and your net price are the same.
Paying for college can get confusing.
For step-by-step assistance with comparing your award letters and all 10 of your loan options, check out the Financial Fit program.
The Subsidized Direct Loan
You should determine whether or not a subsidized Direct loan is listed in your award letter. The subsidized Direct (student) loan is the most attractive loan available. The student is the borrower and the parent has no legal responsibility to repay. The interest rate—a low 3.4 percent—begins to accrue 6 months after graduation, and the repayment program begins 6 months after graduation.
The Unsubsidized Direct Loan
Though the unsubsidized loan is a student loan, it may not be as attractive as the subsidized loan. Like the subsidized loan, the repayment does not begin until 6 months after graduation. However, the interest of this loan accrues immediately, and the interest rate is 6.8 percent.
The maximum amount that students are allowed to borrow from the subsidized and unsubsidized Direct loans combined is $5,500. If you want to consider these options, but don’t see the full $5,500 offered in your award letter, contact the Financial Aid Office to inquire about including the full amount in your financial aid package.
The Perkins Loan
Some families will also see a Perkins student loan in their award letter. This loan is uncommon and is typically offered to families who have high financial need. Like the subsidized Direct loan, the interest rate for the Perkins loan does not accrue until after graduation. The rate is only 5 percent.
To determine your net price, or the amount you will pay for college, complete the following equation.
Direct costs – Grants and Scholarships – Loans (if desired) = Your Net Price
After completing this standard formula for each of your college award letters, you can begin to compare the costs of all of your college options.