Most students will receive their financial aid offers in early April. Then families have to make the difficult decision of which college is going to be the most affordable for them.
But are you prepared to make the best decision? Here are three things to keep in mind when it comes to analyzing financial aid offers.
1. Your Student's Cost of Attending Will Likely be Higher Than Your Estimated Family Contribution
When you initially submitted the FAFSA, you would have received an estimate of what the government thinks your family should be able to contribute to college costs. This is known as the Expected Family Contribution, or EFC.
The colleges you apply to use that number to determine your financial need. In theory, the school should offer you as much financial aid as you need to cover the gap between the sticker price and your EFC. In practice this is rarely the case. Students often have to cover the gap by taking on additional loans.
2. Financial Aid Packages May Include More Loans Than You Think
A financial aid package includes loans, scholarships, grants and work study. Unfortunately, it’s not always crystal clear to families what constitutes a loan and what constitutes a scholarship. Some financial aid packages have even listed loans as “awards”.
Not every school does this, and some are quite clear about each item that appears. But double-check to make sure you know how much of the financial aid package is made up of loans, and what type of loan they are. Subsidized loans are generally preferable to unsubsidized.
3. The School Offering the Biggest Discounts Won’t Necessarily be the Best Deal
When you go grocery shopping you know that $11 bottle of olive oil is still more expensive than the $8 bottle of the same size, even though it says it's been marked down from its original price of $14.
While there’s a lot more to choosing a college than choosing what groceries will end up in your cart, the same philosophy about discounts apply. You may be excited to see a large scholarship on your student's financial aid package, but if it's an expensive college to begin with the scholarship may still not make it affordable for your family. It's helpful in this instance to think of scholarships as marketing dollars the college uses to sway your student.
For example, take the following comparison between schools A, B, and C.
Glance quickly at the chart and you’ll see College A is meeting this family’s full financial need. So this is the winner, right?
When you take a second glance at the breakdown of the aid, you’ll see College A has included a $14,000 unsubsidized loan in their package. Ouch! For the family concerned about taking on debt B or C are the better options.
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