How to compare financial aid packages

Congratulations! Your child is headed off to college. The acceptance letters are in—and so are the financial aid packages. Now comes the tough part: How do you know exactly how much each school is going to cost? 

It would be great if all higher learning institutions listed their financial aid packages the same way, making an apples-to-apples comparison simple. Unfortunately, they don’t. Here’s a guide on what factors to consider when comparing your various financial aid packages.

Find the estimated cost of attendance. Some schools will make it easy and total up all of the expenses in one place on the offer letter; others may require you to hunt around to gather all of the costs and add them up on your own. Remember, the big ticket expenses are: tuition and fees, room and board, books and supplies (including computer costs), and commuting/transportation. If you know that your child will have additional expenses (such as club memberships or travel needs), add them on. 

Break down the assistance offered. You may have three distinct buckets of aid, plus your own and your child’s contributions. Remember, the total aid offered is only for the upcoming school year. Each year could be substantially different, influenced by factors such as your income level, family changes, and financial hardships.  

1. Grants and scholarships: These are awards based on merit or need that do not have to be paid back. As you will have to fill out a FAFSA every year, you need to find out if these awards are single year or multi year. Also, be sure to determine which awards are firm and which are estimated.
2. Loans: Break these out by Stafford loans (paid by the student) and PLUS loans (paid by the parents). Also be sure to note which Stafford loans are subsidized and which are unsubsidized. The U.S. Department of Education pays the interest on subsidized loans as long as the student remains in school, for the first 6 months after leaving school, and in case of deferments. There is no grace period for unsubsidized loans; repayments start while the student is still in school.
3. Work-study programs: Most schools will offer a federal work-study option, which caps earnings at the amount listed. Does your child want to work? Do you think he or she can earn more by bypassing the program and finding a part-time job independently?

Parent/student out-of-pocket payments: This is typically the leftover amount that the school feels you should be able to pay on your own, whether from a college savings plan (such as a 529), through private loans, or from other sources.  

Make a spreadsheet that details all costs. Putting the costs in a side-by-side format can help you weigh the pros and cons of each offer. A few things to remember:

• The cost of college keeps rising. Factor in at least a 2% increase year over year when doing your overall comparison, as the cost of tuition and fees at a 4-year public institution has increased by an average of 2.2% over the past 30 years.¹
• A four-year education is a thing of the past. Most students take between five and six years to graduate with a bachelor’s degree.² Have you saved enough for six years? It’s a good idea to sit down with your child and discuss your finances so they have a clearer understanding of who will pay for what. 

Not satisfied? You can appeal. If your child wants to attend a certain college, but the financial assistance offer you received still makes it too expensive for you to consider, contact the school’s financial aid office.

Depending on the college, you may need to write a letter stating your situation or you may be able to make a case directly to a review panel. You will need to provide documentation for any special circumstances you feel will bolster your appeal.

Regardless of your situation, your financial professional can help you budget and save for college.