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Understanding those Critical Financial Aid Letters

“The waiting is finally over!” Mrs. Drew* happily shared with me as I answered my phone in April 2018.  “Scott* got into all of the schools on his list, which is wonderful.  So, how do we decide where he should go?  I have started receiving his financial aid award letters and I don’t understand them.  Why are there loans? And, what does it mean for us and for Scott?” 

This is a common experience for parents and students.  They have waited anxiously to receive those all-important admission decisions, and proudly boast to family and friends when their child gets into his or her dream school. 

However, parents and students quickly realize that they have to make a decision AND the down payment no later than May 1, which is National College Decision Day. That’s because it’s also frequently the deadline for students to make deposits to attend the college of their choice.

College essay

To help you wade through this process, I’ve given you definition for common terms on financial aid award letters:

Expected Family Contribution (EFC) Parents and students may have first noticed this term when completing the FAFSA in the fall.  The EFC determines any need-based federal and state aid as well as any aid from many colleges.  The EFC represents the minimum amount families are expected to contribute toward college expenses in any given year.  Merit aid and need based aid do not reduce the EFC. 

Cost of attendance (COA); (also called the sticker price):  This includes direct costs, such as tuition, fees, room and board) and indirect costs, such as books, supplies, loan fees and personal expenses.  It is essential to not underestimate COA.


Merit Aid:  This is any ‘free’ money that the college awards students, usually based on grades, major and extra-curricular activities.  Any scholarships that a student earns before beginning college may impact the amount of aid awarded.  It is important to check with the colleges’ financial aid office to determine if their merit aid award will be cut. 

Grants:  This free money for college students falls across two broad categories, depending on what eligibility requirements are attached to the funds.  

Need-based grants, such as Pell Grants, are issued to students exhibiting the greatest levels of financial hardship in paying for college.

Merit-based grants, or merit aid, are tied to performance, like good grades and other personal achievements.

Scholarship:  This is any money awarded to students based on their grades, major, extra-curricular activities, religion, ethnicity, sports, hobbies or parents’ career or military service. Students can begin to apply for scholarships in either their junior or senior year of high school to help offset any student or parent loans. 

Scholarships are available every month of the year and for all four years of college.  My best advice on scholarships is that if a student finds a scholarship that they qualify for, they should apply.

Work Study:  This is a type of financial aid that a school awards to a student who has completed a FAFSA and has demonstrated a financial need. The student is given a job (usually on-campus) and is paid by the school not to exceed a determined amount.  The amount of pay could be used to offset any loans.

Student working

Subsidized Loans:  These are loans for undergraduate students with financial need, as determined by your cost of attendance (COA) minus expected family contribution (EFC) and other financial aid (such as grants or scholarships). Subsidized Loans do not accrue interest while you are in school at least half-time or during deferment periods.

Unsubsidized Loans:  The only difference between these types of loans and a subsidized loan is that the interest begins to accrue on the loan the minute the loan is taken out. 

The reality in 2019 is that most students graduating from college are leaving with approximately $40,000 in college debt.  With some pre-planning and hard work, however, students and parents can minimize that amount considerably.  I have witnessed many determined high school students find scholarships to completely offset any debt. 

Interested in learning more about finding scholarships for college.  I can help.  Contact me at 240-285-1920 or

*Not their real names.