Making Sense of Your Financial Aid Award Letter: What do the numbers mean?

Receiving your financial aid award letter can be an exciting time when you’re prepping for college. You can see how much financial aid you’re eligible to receive per college you’re accepted to. But it can also be confusing – what do the numbers mean? What is the financial aid award letter, and do you need to act on it? Which college has offered you a better “deal?” We’re breaking all of this down for you.

Student reviewing financial aid award letter

What is the financial aid award letter?

Your financial aid award letter is the amount of financial aid you qualify for. The letter details the total cost of one year of attendance (COA) at each college or university you’re accepted to.

What does the financial aid award letter look like?

The award letter will include the college letterhead, your name and address, and an opening paragraph explaining this is your financial aid award offer.

Direct / Billable Costs

Direct costs are paid directly to the college, such as tuition, room and board, and other fees determined by the college.

Indirect / Other Costs

Indirect costs, also know as other costs, are paid by you, the student, on your own. Other expenses might include transportation (car, gas, bus), textbooks, school supplies (notebooks, pens, paper), technology (computer, phone, chargers), and personal expenses (food, clothing, toiletries, etc.). Keep in mind, this is an estimation of the costs, so your total expenses may be more or less than what’s listed in your award letter.

Total Estimated Cost of Attendance

This is the total amount of money estimated that you’ll need to pay to attend the university or college. This includes direct / billable costs paid directly to the school and indirect / non-billable costs, expenses that aren’t paid directly to the school.

Awards / Gift aid

The awards section will list the scholarships and grants you’ve received. This is free money that you don’t have to pay back, funded by either the government or the college itself (through its endowment). The awards might be broken down into fall semester, spring semester, and the total awarded for the semester.

Other financial aid 

Sometimes this is lumped into the gift aid section, but will include other kinds of financial aid, namely loans (money you need to pay back) or work-study (you need to apply for a job to earn this). This may also be broken down per semester. Some schools include extra information about the terms of the student loans offered.

Total Financial Aid Package

The total financial aid package includes all of your awards – gift aid, loans, work-study, grants, and other methods of paying for college per semester.

Effective Cost of Attendance, or Expected net cost

Cost of tuition – financial aid awarded = Your net cost or effective cost of attendance. This is how much money you will need to pay for college out of pocket, after all award money is factored in. It makes two important assumptions: (1) That the estimated total costs are right (your indirect costs might be higher, for instance, if you spend a lot during college), and (2) That you will accept all financial aid award money, including the loans.

Some colleges will break this down further, into “Expected family contribution” and “Expected student contribution.” Together, this is the net amount you and your parents/guardians are meant to pay for college. 


The college might include a closing paragraph thanking you for your interest in the college, a deadline to accept the financial aid award offer, and contact information.

Financial Aid Award Letter Example
Click to download a PDF of this Financial Aid Award Letter example.

When will I receive my letter? 

You’ll receive each financial aid award letter around the time that you receive your college admission offer letters (your acceptance letters). Once you select the college you want to attend, you may choose to accept your financial aid offer or appeal it. You’ll receive a new financial aid award letter each year, since tuition costs can increase and your financial circumstances might change. (This is also why you need to file your FAFSA every year!)

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What if I’m accepted to multiple colleges?

You’ll receive one financial aid award letter for each school you’re accepted to. Each letter will lay out your awards, the final Cost of Attendance, Expected Family Contribution, and other financial aid information that can help you decide which school to attend.

You might receive a better financial aid award letter from a school that’s lower on your target college list. If so, consider writing a financial aid appeal letter explaining that you would like to attend your top choice school but received a much better financial aid package at a competing school.

What is the cost of attendance (COA)?

Your estimated COA is the estimated total you will need to pay out of pocket to attend college. This includes the direct and indirect costs (tuition, room and board, textbooks, transportation).

You might also see an expected or effective net cost of attendance at the bottom of your award letter. This will be the total amount of money you’ll be responsible for paying, after financial aid awards are applied. Note that this COA figure assumes you will accept 100% of your financial aid package, since most students do.

Reviewing your financial aid award letter

What is the Expected Family Contribution (EFC)?

Your Expected Family Contribution is a starting point for how much money your family is able to contribute to your college expenses. The EFC helps determine factors, such as if you’re eligible for the Federal Pell Grant program, Federal Work-Study, grants, and loans.

Colleges will generally try to make sure your effective COA = EFC, since you might not be able to afford more than your EFC. However, sometimes you’ll still have a gap in funding. That’s when it’s a good time to consider searching for external scholarships

What kind of financial aid award types are there?

Your financial aid package is likely comprised of multiple types of award types, including: 

  • Scholarships and Grants (e.g. Federal Pell Grant): Free money you don’t have to pay back. This might come from the government or from your college’s endowment. 
  • Work-study jobs: Money you’re eligible to earn, as long as you work at an eligible job. 
  • Federal student loans: Public, government-funded loans. If you have to take out loans, it’s a good idea to max out your public loan offers, before seeking private company alternatives. That’s because government loans generally have much better borrowing terms (lower interest rates, longer repayment periods). 

Also remember that you can win “external” or “outside” scholarships, above and beyond this financial aid award package. You can sign up for Going Merry to find and apply for these kinds of scholarships.

What’s the amount I actually need to pay? 

The expected / effective net cost of attendance, located at the bottom of the financial aid award letter, is what you’ll need to pay.

How should I be comparing multiple financial aid award offers? 

If you receive multiple financial aid award letters, compare the expected net cost. For schools that don’t show this, it will include the total cost of attendance minus your total financial aid award. You may also want to consider how much of this is loans.

For example, which offer do you think is best, from these three?

Financial Aid Award Letter from College A: 

  • Cost of attendance (tuition, fees, books, etc.): $40,000
  • Award package (scholarships, grants, work-study): $20,000
  • Award package (loans): $15,000
  • Net cost (need to pay): $40,000 – 20,000 – 15,000 = $5,000 (pay now) + $15,000 loans (repay later)

Financial Aid Award Letter from College B: 

  • Cost of attendance (tuition, fees, books, etc.): $30,000
  • Award package (scholarships, grants, work-study): $20,000
  • Award package (loans): $5,000
  • Net cost (need to pay): $30,000 – $20,000 – $5,000 = $5,000 (pay now) + $5,000 loans (repay later)

Financial Aid Award Letter from College C: 

  • Cost of attendance (tuition, fees, books, etc.): $20,000
  • Award package (scholarships, grants, work-study): $5,000
  • Award package (loans): $5,000
  • Net cost (need to pay): $20,000 – $5,000 – $5,000 = $10,000 (pay now) + $5,000 loans (repay later)

In this case, College B has given you the best offer because it has the lowest net cost (now and later). What does this tell us? 

  • The college with the lowest direct/indirect costs is not always the most affordable college for you. College C originally costs less than College B ($20k vs. $30k) but because the aid package is worse, your net cost is better for College B. Sometimes, more expensive colleges might end up being cheaper for you, if the schools have big endowments (so give generous financial aid) or if you qualify for merit scholarships.
  • Don’t forget that loans aren’t free money! You still have to repay them later. Even though College A and College B have the same “net cost” to pay now, with College A you would have much more debt ($15k compared to $5k). So even though colleges often don’t highlight this aspect, it’s important to consider when comparing offers.

However, if your first-choice college isn’t the one that’s given you the best financial aid package, then you might want to consider writing a financial aid appeal letter to request more award money and bring down your net cost of attendance.

OK, now that I know what my financial aid is, how do I cover any additional expenses? 

There might be additional expenses over and above what the college has included in their Cost of Attendance calculation. This might include transportation (car, bus, gas), technology (such as a laptop or tablet, software), or school supplies (pens, notebooks, backpack, etc.).

You have a few options in covering these extra expenses. You can work part-time, tap into your existing savings account, or apply for scholarships and/or student loans. Keep in mind, scholarships are free money, while loans require you to pay back the money with an interest rate.

What do I do next?

Contact your college’s financial aid office with any questions you might have, and to see if you qualify for additional financial aid. (You might also appeal for more aid.) Create an action plan for your next steps.

If you’re awarded scholarships, confirm if and when the scholarship awards can be renewed, and what you have to do or maintain to keep the scholarship throughout your college education.

If you plan to participate in a work-study program, speak with your school about how many hours you’ll be working, how to find or get placed in a job, and how much / when you’ll be paid.

Additionally, if you plan to use federal student loans, confirm the interest rate, how much and when you’ll pay, and how soon you’ll need to start paying back the loan after you receive the funds.

What do I do with my financial aid award letter?

Accept your letter if you’re happy with it! Your letter will contain a deadline to accept your offer, and instructions on how to accept it. If you’ve selected the college or university you want to attend, be sure to not only accept at that college, but decline your offers at other schools.

If your financial situation has changed and you need additional financial aid, consider requesting a financial aid appeal for the opportunity to receive a higher amount of aid.

Book, coins and calculator

Want to learn more about your financial aid options?

Check out these blog posts for more financial aid resources pertaining to your award letter:

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