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How to read your financial aid award letter

Financial aid letter

Deborah Moors
January 09, 2017

You’ve been accepted to the college of your choice and have gotten your letter telling you about your financial aid award. 

Great! So...what exactly does that financial aid award letter say?

Each college creates its own award letter, but it will usually include your cost of attendance (COA), expected family contribution (EFC), and information about federal student loans (which are to be repaid), grants, scholarships and work-study. Here’s a decoder that’ll help it all make sense.

Cost of attendance (COA)

Also known as The Sticker Price. This is the total amount that it will cost you to go to college for the academic year — including tuition, fees, housing, meals, books, estimated personal costs, possible loan fees and transportation. The EFC (see below) is subtracted from the COA to calculate your financial need.

Expected family contribution (EFC)

This number helps to determine your financial aid eligibility. It is calculated according to a formula established by law and considers your family’s taxes and untaxed income, assets, and benefits (like unemployment or Social Security). Your family size and the number of family members attending college is also considered. (You can download a guide to the EFC formula, and find lots of other resources, on the Department of Education Federal Student Aid website.) 

Gap (unmet need)

COA – EFC = Funding Gap. This is the amount of money that you’ll be trying to make up with scholarships, work study, grants or loans.

Grants and scholarships

Both grants and scholarships are financial aid that doesn’t need to be repaid. Typically, grants are based on your need, while scholarships are often (but not always) based on merit. They may be provided by the federal or state government, the university or college, or private or nonprofit organizations.

Net price

This is how much you’ll pay to attend a university or college for one academic year after you’ve subtracted any grants and scholarships you’ve received.

Student employment

Your FAFSA will help determine whether you qualify for work-study. According to the U.S. Department of Education, “Federal Work-Study provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses. The program encourages community service work and work related to the student’s course of study.” You’ll be able to earn at least the current federal minimum wage, but you can only earn as much as your federal work-study award. 

Federal versus private loans

Remember, there’s a difference between federal student loans and private student loans. Federal loans offer fixed interest rates and income-driven repayment plans, and they are typically less expensive than private loans. Learn more about types of loans on the Federal Student Aid website

The bottom line

As more than 65 percent of UNC students will receive some type of financial assistance this year, it's important to remember that the most expensive school may not cost you the most. Much depends on how much aid each university offers. To compare offers, take your COA and subtract grants and scholarship amounts. The remaining figure is your net cost — this is what you’ll pay out of pocket. You may defray some of those costs with earnings from work, or delay costs through the loans you borrow.