How To Navigate The Financial Aid Process

Getting acceptance letters from colleges is a thrilling time, but maybe more important are the financial aid offers that come around the same time.

We sat down with financial aid expert Jeff Levy, who talked about how financial aid offers should be read, common misconceptions about financial aid, and strategies for negotiating aid offers.


Watch the video or read on for a summary of his answers.

How To Read A Financial Aid Offer Letter

The financial aid offers you receive from colleges are not standardized forms. Each letter looks different, which means it's up to you to compare apples to apples. Jeff offers three important steps for doing so.

1. Determine your net price.

The net price is the amount of money you will pay—whether it's now or in the future—for your child's education. There won't be a line for net price on your offer letter: you'll need to do that math yourself. Here's how.

Take the total cost of attendance for one year (which should be listed on the offer letter) and subtract only the grants and scholarships offered per year (do not include loans in this calculation). This calculation will allow you to see how much free money you're getting and how much you'll have to pay yearly at each school.

2. Determine your out-of-pocket cost.

The out-of-pocket costs is the amount of money you will pay now—as in, what will you owe for your student's first year of college?

To do this calculation, take the total cost of attendance and subtract grants and scholarships as well as loans and student employment potential. Eventually you'll have to pay those loans back, but by then, your student should be earning some money on their own

3. Ignore the Parent PLUS loan.
If the school has added a parent plus loan, take it out of the equation. Anyone can get this kind of loan—it's just that some schools list it and others don't. To make a fair comparison, you'll want to remove that from the equation.

Common Misconceptions (AKA Bear Traps)

Jeff speaks about bear traps: those things that will catch you up (and maybe eat you alive). Here are the three most important things to remember:

1. Financial aid awards don't all look alike.

Be sure you're comparing apples to apples, comparing component parts and not just looking at the bottom line. Using the strategies suggested above, you should be able to do this without any trouble.

2. Make sure the total cost of attendance is accurate.

None of those calculations you've done will be useful if the data isn't accurate. Be sure to double check that the total cost of attendance listed on your offer letter (usually on page 1) includes everything: tuition, fees, room, board, books, and personal expenses.

3. Not all loans are created equal.

Federal student loans packaged in financial aid award are great. The Parent PLUS loan, on the other hand, shouldn't be part of the equation. If you eventually need to borrow to pay the parent portion, you can—but that will be the case at any school and shouldn't be part of the calculations when comparing offers.

3 Steps To Ensure A Successful Financial Aid Process

In order to find a school that fits your student academically, socially, and financially, it's crucial to have a plan. Here are the three steps Jeff suggest to make it happen:

1. Talk to your child about finances as early as possible. The last thing you want to happen is for them to get into the college of their dreams and then find out that they can't attend for financial reasons. It's best for everyone to understand the possibilities and be prepared.

2. Leave time to review your financial aid offers. Your child's financial aid offers should all come in by April 1 hopefully, which gives you one month to compare each of them before the national reply date of May 1. Make sure you schedule time to review the offers using the strategies above.

3. Call the college's financial aid office. If the financial aid offer from one of your child's top choices is not as competitive as a similar college they've been accepted to, talk to the financial aid office directly. You can be frank with them. Tell them that cost is an important factor for you, and ask them to explain why their offer is lower than a similar college and if there's anything they can do to adjust.

Bonus reading: Jeff and his colleague, Jennie Kent, do an annual analysis on the amount of need-based and merit-based aid provided by hundreds of colleges. You can see the 2018 numbers here. If your student is still deciding where to apply to school, this can help you narrow down the choices.