Finding the easiest and quickest way to understand the financial aid award letter is paramount to college bound students and families. Award letters come in different formats, so having a guide to differentiate gift-aid (free money) versus self-help financial aid (loans and work study) can be helpful. To assist families in their analysis, we have given an overview of the various online award letter tools currently available. They all can compare your incoming financial aid award letters but some have the flexibility to give you more details and future college cost projections. College Affordability LLC has included our own software, College Cost Analyzer and compared it to the award comparison tools of Fin Aid, CFBC and Big Future. With our analysis, we have listed key features for each product in a table format for a quick review.
The Department of Education also offers a college Shopping cart for the award letter comparison in a downloadable PFD format. It does create an organized format but since this is not available electronically, we have not included it in our analysis.
Once you have your award letters in the same format, you are ready to do a direct comparison. Developing a custom cost of attendance and analyzing net cost based on each of your award letters is an important step in making the best college decision. It is important for families to look at the type of aid on their award letter and make sure they are comparing the same numbers. Look at the percentage of award aid that is gift aid compared to the percentage of self-help money (loans & work-study).
We think it is very important to be able to project the four-year net cost for each college based on each student’s specific situation and award. The advantage of generating a four-year projection for a family is that a family’s net cost could change significantly when other siblings are enrolled or graduate in a post-secondary program at the same time. The actual college award letter received only provides one-year cost of college. By using the historical gifting policy of a college and the actual award letter, the EFC PLUS software is able to estimate the future financial award amounts. Taking the one-year award amounts and multiplying it by four is not a true representation of the total net cost. By not calculating a four-year total, families run the risk of not finding the best college value over the total years in college.
Understanding the out of pocket costs over the next four years will also dictate the debt structure strategies and help a family maximize their financial resources. Creating scenarios on how to pay for college can be stressful especially when there is a funding gap. The EFC PLUS College Cost Analyzer software will give the family the ability to compare the various ways to borrow funds such as a Parent Plus, a home equity amount or a private loan. By having this additional information, students and families are better prepared and understand the financial outcome of each college before a final decision is made.
The EFC PLUS approach helps to bring the college bound student into the better college value discussion. We call this the outcome discussion because after calculating the four-year cost and debt structure for your child they have a better idea of what their life will look like after graduation. Visualizing and understanding the estimated four-year loan amount needed to supplement the cost of college can bring a reality check into the discussion. As we have stated in our earlier blog article, according to the study by FINRA and Indiana University study, students who are aware of their student debt make better decisions. As parents, that is our goal.
By taking a more comprehensive approach, the risk of a college transfer is also reduced. The College Cost Analyzer organizes the information electronically and sorts the award letters by lowest net cost over the four years. We do realize that the college decision will involve many other factors that are not financial. By having a more detail analysis of total cost, students and parents can focus on the subjective parts of the decision. Cost is just one factor in finding the best value and families must also keep in mind the academic strength, retention and graduation rates of your choices. Our goal is that families will create a customized four-year budget and get a better understanding of college affordability for their college expenses before they submit their enrollment deposit. Before you make a decision, take a moment to compare your award letter with online tools.
EFC PLUS will be offering a webinar on the award letter on March 29, 2017 at 8 PM. If you want to understand how to compare award letters, please sign up. Fred Amrein will review the contents of the award letter as well as some of the below topics:
- Understanding the types of scholarships
- Warning of front-loaded award letters
- Identify risk of financial gap
- Proper understanding of college debt structure
- Minimize the risk of transferring and lost credits
Please click here to link to the EFC PLUS webinar page. Sign up for this webinar and also view our upcoming webinars.