College Financial Aid Awards Are Now Easier to Understand

Thanks to some new-ish guidelines, college financial aid letters should be easier to understand than ever before. But "easier" doesn't necessarily mean "easy."

It’s spring of 2016, flowers are starting to bloom, birds are in the air, and thanks to some new-ish guidelines, college financial aid letters should be easier to understand than ever before. WOOHOO! Of course, “easier” doesn’t necessarily mean “easy.” So before you throw a springtime financial aid jubilee, make sure you really understand your financial aid award letters.

Maybe you didn’t hear about it back then, but last July the National Association of Student Financial Aid Administrators (NASFAA) officially adopted a new “code of conduct” for how they write up college financial aid letters. Obviously, if you’re an incoming college freshman, you’ve probably never seen a financial aid letter before, so you have nothing to compare it to. But whether you’re a financial aid newbie or an old pro, you should still know what’s going on with the college financial aid award updates, because they do affect you and understanding—really understanding—these documents is super duper important.

One of the biggest and most meaningful things this new code of conduct calls for is using standardized terms in describing students’ aid. Before, colleges would often use completely different terminology for the exact same things. Now comparing the line items on your financial aid awards from school to school should be easier…in theory. More on that in a second.

Related: How to Compare Your Financial Aid Award Letters

The NASFAA code of conduct also says financial aid administrators should spell out the specifics of their overall costs and to clearly identify each type of aid awarded. This is particularly important when it comes to the loans that are often awarded as part of students’ financial aid packages. In the past, many students and families were confused (and rightfully so) by those loans, not realizing that they don’t lessen the overall cost of their education. After all, these loans were listed right alongside scholarships and grants and included in students’ “financial aid” totals, as though they were free money too! These days, those loans should be more clearly marked, making it easier for families to understand the full extent of what they owe—and what they might need to pay back.

For years financial aid award letters have drawn criticism for being too confusing, full of terms that the average student and their family were generally unfamiliar with. Since the code of conduct was put into place last summer, this is the first admission cycle where the new guidelines could be used. And the consensus among financial aid experts is that these changes are a good (and necessary) thing.

Of course, the new code of conduct isn’t perfect, and many of those same experts say it doesn’t go far enough. For example, it doesn’t call for colleges to provide a basic, standardized, comprehensive cost of attendance—which is, at the end of the day, the real number you need to know when making your final college decision and when comparing one school to another. Federal loans, though they may be more clearly marked now, can still be lumped in as financial aid, when, in reality, they do not lower the cost of attendance. And, overall, the “repercussions” of not adhering to the code of conduct are pretty slim (an escalation of complaints and hearings and reprimands…). So you may still encounter some colleges that follow the code more closely than others.

As Time reports, “experts warned that the code’s limited scope and voluntary nature meant that it would not guarantee all families would get all of the pricing information they need to choose the most affordable college, or to budget wisely.” This means there could be a lot more information you need to gather about the specifics of your financial aid award, like the exact terms of a scholarship or grant. (Colleges say there’s simply too much information to cover everything every student would need to know about every piece of their financial aid package. So there’s that.) Even if you and your family think you fully understand what your financial aid award letters entail, you should still investigate each line item. Take it upon yourself to figure out the details of everything in your financial aid award letters and to come up with a realistic total cost for each college you’re considering.

Here are a few questions you should ask of each item in your financial aid award letter:

  • What type of financial aid is this? Is it a scholarship or grant (which do not need to be repaid), work-study (which is an on-campus job and is not actually guaranteed money; you earn the money like you would at a part-time job), or a loan (which does need to be repaid, probably with interest)?
  • If it is a loan, what are the repayment terms? Is interest deferred until I graduate?
  • What are the renewal terms for this aid? Will I have to reapply every year or will it be automatically renewed?
  • What do I need to do to maintain any scholarships or grant awards? Do I need to stay in the major I declared on my application? Do I need to keep a certain minimum GPA?

Finally, here’s the big question: what is your true net price for each school? Meaning, what is the total amount you and your family would need to pay for you to attend that college? This includes tuition, room, board, fees, and other miscellaneous expenses ­minus scholarship and grant aid (the free money you don’t have to pay back). You should include loans in your net price for each school, because that’s still money that will come out of your pocket to attend the college. You might find the US Department of Education’s “financial aid shopping sheet” helpful in doing this. (It’s a worksheet colleges were encouraged to adopt, kind of like the code of conduct; thus far, about 2,500 out of the 4,700 schools in the US have chosen to do so.) The financial aid gurus at Edvisors offer some good advice for breaking down your financial aid award letters too.

If you have any questions, you can go back to the financial aid offices at your colleges or ask your high school guidance counselor. And if you want to go straight to the source with a question—or a criticism—about your financial aid award, you can contact NASFAA at or send them an anonymous complaint.

Related: How to Appeal Your College Financial Aid Package

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