Comparing Financial Aid Award Packages
Information courtesy of AES (www.AESmentor.org)

Where you choose to go to college may be determined by how much that school costs. Don’t get too freaked out because there are ways to afford most schools you want to attend. Thanks to financial aid, a higher education can actually be very affordable. This article will explain financial award packages and give you an idea of what to look for when you’re comparing the different financial aid packages.

You’ve completed the FAFSA and had the results sent to the schools you’re interested in attending. Soon, you’ll receive the financial aid award packages from those schools. 

An important factor in financial aid is your Expected Family Contribution (EFC). Your EFC is what you and your family can afford to pay for your higher education. Your EFC stays the same no matter how much the school costs. Your EFC was listed on the Student Aid Report that was sent to you after you filed your FAFSA.

The school subtracts your EFC from the total cost of attendance and…you have your financial need. This is where things can get a little confusing. Remember, there are four types of financial aid: Grants, Scholarships, Work-Study, and Student Loans. Your financial aid package will probably contain at least one of these types of aid and—maybe even all four.

Let’s start out by showing you a simple financial aid package: State University costs $8,000 per year. Your EFC is $3,000. So your financial need is…anyone? $5,000. Good job. See, you will need to use math later in life.

State University is offering three different types of aid:

Federal Pell Grant $1,500 
Federal Stafford Loan 2,500
Work-Study 1,000

So, thanks to financial aid, you can now afford higher education. This is a very basic example of a financial aid award package. The types and amount of financial aid can vary for many reasons. 

You may have to compare several award packages to determine which one is best for you. Here are a few tips to help you compare award packages:

• Ratio of grants to loans: In general, packages with a higher proportion of grant aid than loan aid are more appealing. You’ll have less debt to repay when you graduate. This ratio may also give you a clue how much the school ‘wants you’ since colleges tend to award higher proportions of grant aid to the most desirable students in the accepted group.
  
  
• Ratio of self-help to grants: Take a look at the big picture beyond just grants vs. loans. How much of the total cost of attendance are you expected to cover through loans, your EFC, and student employment? You’ll need to be realistic about whether you can meet the earnings expectation.
  
  
• Loan terms: Compare the types of loans you are expected to take on. Are the terms favorable in terms of interest and repayment? Student loans with low interest rates and no repayment until after college are preferable to private or unsubsidized loans with less attractive terms.
  
  
• Gapping: Some colleges award aid that is less than the difference between your EFC and cost of attendance. That’s called “gapping.” If you find you’ve been ‘gapped’ in an award, only you can determine if you will be able to, or want to, come up with the additional money in order to attend.
  
  
• Future Packages: You’ll want to find out if all or part of your financial aid award is renewable if family circumstances stay the same or change.
  
  
• Outside Scholarships: If you’re applying for or will qualify for outside scholarships, be sure to find out whether this money will affect your financial aid award package. At some colleges, an outside scholarship directly reduces an institutional grant by the same amount. Other colleges allow a scholarship to reduce the amount of suggested student loans.