How to read a financial aid letter

An aid letter tells you what a school is offering, in that school's own format. There is no standard layout, no required ordering, and no obligation to make the important distinction obvious.

So the first job is not to compare schools. It is to translate each letter into the same two questions: what does this cost, and how much of the answer is borrowed?

Grants and scholarships are money you keep. Loans are money you repay, with interest. On the page they often sit in one list, in the same typeface, added into one reassuring total labelled something like "your aid package".

Take a pen to it. Put grants and scholarships in one column and loans in another. The first column reduces what college costs you. The second only moves when you pay for it.

Net price is the cost of attendance minus the grants and scholarships. It is what this student, at this income, would actually have to fund — from savings, from income, or from borrowing.

This is the number that lets you compare schools, and it routinely reorders them. A school with a frightening sticker price and strong aid can cost a given student less than a cheaper-looking one with none. Comparing published prices tells you almost nothing about which is affordable.

An aid letter covers one year. Some awards renew automatically, some depend on maintaining a grade threshold, and some are one-off entry awards that do not repeat.

A package that looks strongest in year one can be the most expensive across four. It is a fair question to ask the financial aid office directly, and the answer is worth having in writing.

On a subsidized federal student loan, the government covers the interest while the student is in school. On an unsubsidized one it accrues from the day the money is disbursed, so the balance at graduation is larger than the amount borrowed.

That difference compounds quietly across four years and is easy to miss, because both appear on the letter as a loan with an amount beside it.