Congratulations to your son or daughter on his or her acceptance to college. Typically, chools let applicants know whether they have been accepted by April 1. Most times, they require your child to reply with an answer by May 1.
Along with those acceptance letters come offers of financial aid, if you’re lucky. If you are the parent of a high school senior, you may be trying to understand one of those financial aid letters right about now. You’re not alone: Those letters confuse lots of people.
One reason for the confusion is that your expectations of what your student should get in aid and that doesn’t always match what the college offers.
“Realize that most colleges don’t meet 100 percent of the family’s calculated need,” warns Kevin R. Worthley, a certified financial planner in North Smithfield, R.I.
There’s no guarantee that a college will meet what you believe to be your unmet need — the difference between the amount the college is offering and what you are expected to come up with for tuition, also known as the expected family contribution. If you have spent any time at all using a college’s “net price calculator,” you probably have a sense that what you think you can afford to pay for college and what a college believes you can afford are very different numbers.
Even so, most financial aid offices try to do a good job of making college appear affordable for the families they believe need help, and that’s what the financial aid offer is all about.
If you were fortunate enough to have received a letter regarding financial aid with your son’s or daughter’s acceptance, you may need some help deciphering exactly what the letter is saying. Here are the three most common types of financial aid and brief explanations of what they mean for your bottom line.
Scholarships and Grants
The only type of financial aid that you do not have to repay or work to receive, scholarships and grants are often awarded not just on financial need but also on academic or athletic merit. While it’s great to receive an offer for a generous scholarship or grant, you have to ask certain questions before accepting that kind of aid. For example, what are the requirements for keeping the award? With merit aid often comes academic expectations of a minimum grade point average your child must maintain throughout his or her college career. I know one family whose son let his grades slip in his sophomore year, and, poof! Away went his 50 percent merit scholarship. The family ended up having to scramble for loans to cover the rest of his education. Another important question: Is this scholarship or grant guaranteed for four years? Some colleges lure incoming freshman with a generous offer. However, if you read between the lines, you can see that the offer is for the first year only.
College-funded jobs on campus can be a big part of financial aid, but there are no guarantees that your student will actually find employment to earn the amount specified in the letter. Also that amount could add up to the most your child can earn at a campus job —and once he or she has earned that maximum, there goes the job. Finally, if you see a work-study offer in that financial aid award letter, it’s important to clarify if the work-study pay is going toward tuition payments or coming to your son or daughter in the form of a paycheck. Because if it’s the latter, that’s great for your student who wants to make late-night Starbucks runs, but not so great for your ability to pay for tuition.
For many families, the only way to pay for college is for both the student and the parents to take out loans, through either federal programs or private financial institutions. That’s pretty straightforward. Where it gets confusing is when colleges include assumed loans in a financial aid award package. “Some colleges will include a Federal Direct Parent PLUS loan in their award letter, which can make the unmet cost seem very low — or even $0,” explains Lisa Westendorf, who works in the financial aid office at the University of Denver. “While qualified borrowers may get this loan for expenses up to the cost of attendance, it is not guaranteed financing and should not be used when determining unmet cost.”
Finally, keep in mind that if your child was accepted to multiple colleges and received different financial aid offers, it is possible to play one off of the other. For example if your child really wants to attend College A but College B gave a better award, you can share that award letter with the folks at College A and see if they will match it. It’s worth a try. Also, even if you don’t have competing offers, certified financial planner Worthley says, “If the student’s aid award is below average and parents have solid, tangible reasoning why their student/family should be considered for more — especially if that student is a highly desired prospect by the college — financial aid officers can use professional judgment to alter the award.”
In other words, it never hurts to ask for more financial aid. The worst that can happen is that the college says no. And then you are left to decide which is the best college for your child — and which you can best afford for him or her to attend.
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