Heading to College? 6 Questions to Ask Before Accepting Any Student Loans

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You got accepted into college!

All that work, all those hours — it’s time to celebrate. Except, wait. Is that financial aid award letter good news or bad?

Financial aid award letters can be confusing — and really hard to compare, considering there isn’t a standard format used among learning institutions. 

We’re here with a breakdown of a financial aid award letter so you can compare offers from colleges to make the best financial decision — and take on the least amount of debt.

Questions to Ask When You Get Your Financial Aid Award Letter

As you anxiously await acceptance letters from your colleges of choice, you should already be preparing to review the financial aid award letters.

But how do you prepare? 

Although visiting a college’s website may provide some general guidance about the cost of college and financial aid options, your best bet is to reach out to the financial aid office and set up an appointment to speak with a financial aid officer — don’t settle for the student assistant answering the phone. 

By getting the direct contact information for a financial aid officer, you’ll reach someone faster to answer your questions about your financial aid award letter. And we have the must-ask questions to add to your list.

1. What Does the College Consider the “Cost of Attendance”?

An acronym commonly used in financial aid letters is COA — aka, the cost of attendance. 

But what does that really mean? Is it just the tuition and fees? Room and board? Books and personal expenses? Spring break?

Depending on the college, total cost of attendance could include some or all of the above (OK, not the last one — that’s extra). 

Pro Tip

Want to avoid student loan debt? Make sure you ask these six questions before you accept any college’s financial aid offer.

Some financial aid letters don’t break down the amount at all, lumping a generic cost of attendance into a single amount. How can you know what’s included?

Call the financial aid officer and ask them to break down the costs of attending the school into these components: 

  1. Tuition and fees.

  2. Room and board.

  3. Books and supplies.

  4. Personal expenses.

If you’re moving away from home to attend college, make sure you dig into the details about what the real cost of living is — the letter’s “room and board” cost might include a dorm room and a basic meal plan when you plan on living the Greek life and eating like a pro athlete. 

2. Which Awards Are “Free Money” and Which Are Student Loans?

Financial aid awards typically fall into two categories: 

  • Gift aid: scholarships and grants (aka money you don’t need to pay back).
  • Self-help aid: Federal Work-Study Program and student loans (aka money you either must repay or earn by working).

Can you tell the difference between the two by looking at your award letter? If your college uses acronyms you don’t recognize (and many do), ask the financial aid office to help you identify them. 

If the award is a loan, ask for the terms — including interest rates, repayment period and subsidized vs. unsubsidized interest.

Asking for specific details about your loan can help you budget for college costs — and possibly get a jumpstart on payments while you’re still in school. 

The costs associated with loans often aren’t detailed in the financial aid letter, either, so it’s a good idea to ask about them, according to Certified Financial Planner Alexandra Wilson.

“What are the origination fees for these loans?” Wilson suggested asking, noting that this is no time to settle for general or vague answers. “What does that mean in dollar amounts? Don’t just give me a percentage.”

Additionally, do you know which awards are renewable? It’s best to find out earlier rather than later that a financial aid award that covers your first year is non-renewable — meaning, you’ll have to find ways to cover expenses in subsequent years.

To maximize your savings and minimize your student loan debt, accept your financial aid awards in this order:

  1. Scholarships and grants.

  2. Work-study programs.

  3. Subsidized federal student loans — the U.S. Department of Education pays the accruing interest while you’re in college.

  4. Unsubsidized federal student loans — you are responsible for paying the accruing interest at all times for these loans.

  5. State or school loans.

  6. Private loans — be sure to ask which loans are private, as they aren’t always identified in award letters and can have much less generous terms than government loans.

If you break down each award package into the specific loans, you’ll more than likely see a few repeats, including the unsubsidized Stafford loan and Parent PLUS loan. You can qualify for these loans regardless of financial need, which means you can qualify for them regardless of the institution. 

Take that into account if one financial aid offer includes these loans in the total when another college’s award letter doesn’t.

3. How Do My Financial Aid Offers Compare?

If you’re comparing college financial aid packages, it’s essential that you compare the same costs. If you have two (or more) letters, ask the financial aid office to match the detail level of the other schools’ so you can compare costs and awards side by side.

Once you know the cost of attendance and how much financial aid you’ll receive, you can figure out the net price:

Cost of Attendance – Gift Aid = Net Price

Notice that the net price incorporates only the gift aid, aka free money. Even if colleges’ letters look like their financial aid packages cover costs, the net price allows you to see how much you’ll need to take out in borrowed money. After all, that’s money you’ll need to pay sooner or later (and with interest).

The net price is a good way to compare the real out-of-pocket costs among colleges. 

4. It’s Not Enough — Now What?

After you’ve determined what the net price of your college — and decided which self-help aid you want to accept — you may come to the depressing conclusion that you cannot afford your college of choice.

Don’t give up just yet, advised Marla Lewis, financial aid associate director at the University of North Florida.

“Once you get the financial aid package, if it’s not where you need it to be, you’re calling financial aid,” she said. “Say, ‘I want to come, but this is my situation.’ But if you don’t ask, [the school] is going to assume you don’t need it.”

And if another school is offering you a better award package than your first-choice school? Try negotiating, advised Amy Irvine, a Certified Financial Planner and founder of Rooted Planning Group.

“Go back to the college and say, ‘We really appreciate the award that you’ve given to us, but could we have $5,000 more because it would really make the difference over this other college and the grant that’s been offered there,’” she said. 

There’s no guarantee the school can match the offer, but you won’t know unless you ask.

5. Why Is My Award More Than the Cost of Attendance?

Although the opposite problem may seem like a welcome one — your award letter offers more money than the listed cost of attendance — this isn’t the time to break into a rendition of “We’re in the Money” while buying dinner for all your friends.

It is the time to call the financial aid office and ask about the discrepancy, according to Wilson.

“I was offered $10,000, but tuition is only $4,000 — do I need to take out the other $6,000?” she suggested asking. “Are there things I’m not considering?”

This could be the point where you learn that the college doesn’t include room and board in the cost of attendance — or it could be the point at which you realize you don’t need to accept the student loans and can instead rely on a combination of the gift aid and your own contributions.

6. What If My Financial Situation Has Changed?

Life happens. In between the time you filled out the Free Application for Federal Student Aid (FAFSA) and you received your financial aid letter, perhaps you got married and changed your name. Or your parents lost a source of income that was supposed to cover your tuition. 

If you receive an award letter based on old information, call the financial aid office as soon as possible. You should especially do so if your Expected Family Contribution (EFC) listed in the letter is vastly different than your reality — although keep in mind the EFC doesn’t include outside scholarships and loans not listed in the financial aid award letter.

Pro Tip

If you win outside scholarships, ask the college about its outside scholarship policy. The additional money could affect your need-based financial aid package.

Even if your financial situation hasn’t changed, you could have made a mistake when you filled out the FAFSA. If that’s the case, review the documents you submitted and contact the financial aid office as soon as possible to submit a correction.

Understanding exactly what you’re eligible for in terms of financial aid can help you avoid taking on any more student loan debt than you absolutely must. And keep in mind, just because a college offers you loans doesn’t mean you have to accept all of them — or any of them.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.