Updated April 10, 2024

What’s in Your Financial Aid Award Letters? And Why Does it Matter?

Your family has made it nearly to the finish line of college admissions, perhaps a little frazzled and stressed, but you made it this far. Now, you are beyond hopeful that acceptance letters will reward all of your efforts.

That feeling of hope and delight from the college acceptance letters may fade quickly though, as you shift your focus to the financial aid award letters your family receives. That’s because some award notifications may be challenging to decipher and leave you in the dark about the true cost of that school! 

Let’s skip the drama and stress and uncover what should be included in your financial aid awards.

financial aid award letter

What’s the problem with some financial aid award letters?

Financial aid award letters can be less than consumer-friendly to read and understand.

From a 2022 federal study, the Government Accountability Office concluded that most colleges are not following best practices for providing clear and standard information in their financial aid offers, therefore making it harder for families to assess affordability.

A starting point to the problem is that all schools create their own version of the letter, so the formatting or layout of the information as well as the terminology used, varies widely.

For example, many financial aid award letters surprisingly appear as more of a word jumble, ranging from mildly confusing to painfully cryptic for you to solve. Some versions just do not clearly spell out what financial help the school is offering you and what amount remains for you to pay.

The valuable financial information you need, like knowing which monies you won’t have to repay and which monies you will have to repay, may be labeled in industry jargon, acronyms, abbreviations, or perplexing shorthand.

In the simple example below, the use of the letters Lo, Loa, and L may stump the reader unnecessarily as the word loan could easily be spelled out. But what makes this example even more challenging to the reader is that there are three different loan abbreviations in the same award letter. And, a lack of space is not the problem.

If you’re receiving multiple letters containing a variety of acronyms and abbreviations, you’ll spend additional time just trying to figure those out.

Worse yet, some award notifications may be missing information altogether. For example, omitting the full Cost of Attendance or not identifying the Student Aid Index (SAI.)  

To add in just a little extra irritation, sometimes dollar signs, commas, and decimal points may also be missing.

Back to the GAO report in 2022, it was estimated that 91% of colleges failed to include the net price or understated the net price in aid offers. The problem is real.

figuring out your financial aid

Why are financial aid award letters not better written for their intended audience of parents and students?

At a minimum, the college industry is out of touch with the needs of families, and their unfriendly way of communicating financial aid information highlights this. They’re not providing the tools to help families make sound financial decisions.

On the other end of the spectrum, some schools appear to intentionally be misleading recipients or obscuring pertinent financial information, most likely to make you think they are more generous than they really are. 

Sometimes schools show a big financial aid award number at the top of the letter or even show $0 net costs at the bottom of a letter. However, if the award does not clearly identify what is gift aid versus what are loans, then a family may mistakenly believe their college costs are fully covered by the school. Unfortunately, the reality is potentially much different and can instead be the starting point to taking on excessive student loans. 

To avoid this trap, you will need to spend some extra time parsing through each financial aid award letter to discover the true costs to you for each school. 

Here’s what you need to look for so you can save yourself a lot of time, and potentially save a lot of money too.

The 5 key components that should be included in your financial aid award letter

Here are the financial components that should be included in your financial aid offer:

Total Cost of Attendance (COA)

Student Aid Index (SAI)

Gift Aid

Net Price

Loans and Work Study

With these five numbers, your family can gain greater insight into the affordability of each school. You can determine what the school expects you to pay, can assess the generosity of the aid award, and can quickly see if too much debt is already on the horizon. 

If any of these components are missing from your aid offer, please contact the school to obtain the information, so that you avoid misunderstanding their offer and to ensure the school crafted the offer correctly.

To help remember these components and track data for each school, check out The College Financing Plan from the U.S. Department of Education.

There is an annotated version that highlights the various elements that should be included in your financial aid award letter, as seen in the example below. There is also a blank version that you can print or save, and it also contains a short glossary of terms. Both versions can be found by visiting the Office of Postsecondary Education College Financing Plan.        


Another resource with a template for a good financial aid letter is the National Association of Student Financial Aid Administrators Student Aid Offer Model.

Identifying the expected cost for a school

Getting to the all important number of what a school will expect you to pay out of pocket, the Net Price is calculated as:

Cost of Attendance (-) Gift aid = $ amount due to the school

You’ll want to check that your award includes estimates for all components of the Cost of Attendance. They are:

  • Tuition and fees
  • Room and board
  • Book and supplies
  • Personal expenses
  • Transportation expenses

If any COA data is missing, the financial aid award will mistakenly appear more generous. And, unfortunately your family will be left holding the bag when your bill comes due and it is higher than you expected.

As for Gift Aid, it is any money that does not have to be repaid – such as grants, scholarships and tuition waivers. 

Gift aid may be Need-based (considers family income) or Merit-based.

Student Aid Index (SAI)

Based on your completion of the Free Application for Federal Student Aid and perhaps the CSS Profile required by some private schools, a Student Aid Index (SAI) was generated.

The SAI is the number schools use to determine eligibility for need-based aid. It represents an estimate of your family’s financial need.

The Cost of Attendance (-) Student Aid Index = Demonstrated Financial Need

While very few schools will meet 100% of your demonstrated need, having the SAI on the financial aid award letter gives you some indication of how the school determined their financial aid offer for you. Generally, a lower or negative SAI indicates there is a higher financial need, such that Federal need-based aid options may be included in your offer (Pell Grant, FSEO Grant, Direct Unsubsidized loans, Federal Work Study.)

Calculating the real cost of student loans

Your financial aid award letters may include several line items that refer to loans. 

As shown in the Department of Education’s College Financing Plan and the NASFAA Student Aid Offer Model, loan information should be shown in a separate section, not interspersed with the gift aid. 

And, although you may see terms like credit-based aid or self-help aid, all loans should be identified as loans.

Importantly, loans do not lower the cost of college. 

Loans increase your total out-of-pocket college costs in the long run because of interest charges and other potential charges from loan servicing.

Now is the time to get really clear on how student loan debt is showing up in your financial aid awards and what the long-term implications may be to your family for taking on that debt.

Before accepting any loans in an award offer, it’s important to know the total amount of loans needed for all four years of college, as well as loan terms. This includes interest rates and potential repayment schedules. 

For a quick estimate of what your potential loan repayment amounts will be, visit finaid Loan Payment Calculator.  

As you review those details, are student loans coming to your rescue or sinking your financial ship? 

Just because loans are included in your aid offer does not mean you have to accept them. If a school is too reliant on loans in their financial aid award, contact the school to determine if there are other options to consider so that you are not taking on too much debt. And, if you want to decline part of the award, each school will specify how to do so.

Lastly, also under the self-help aid category of your financial aid award, you may find the offer of Work Study. Before accepting it, determine if the work study stipend earned will be applied directly to the tuition bill or if it will be paid directly to the student, so you know what to expect as tuition payments come due.

Finding a good fit school for the right price

Paying for college today is a real investment for your family. Although price breaks from the sticker price are prevalent, fully tapping into these discounts may require extra work on your part. Uninformed buyers will definitely pay more.

The financial aid award letter is at the center of helping you be a more informed college consumer, because it should spell out what a school expects you to pay – your true out of pocket costs.

When these letters are opaque, disorganized, or incomplete, you could end up overpaying for college and taking on too much debt. 

Examine award letters closely for a clear understanding of your costs. Definitely reach out to school financial aid offices for additional clarity. 

The more you know now, the better you can protect your family’s financial well-being throughout the college years and beyond.

Boost Your College Funding Success!

Stay with College Money Smart for the insights, strategies and resources you need to drive down your college costs, avoid excessive debt and protect your financial future.