College acceptances — and rejections — are now out and millions of students are trying to figure out how they are going to afford to go to college. Complicating that effort are financial aid letters sent from colleges, which can be so confusing as to be indecipherable. For help making sense of these important letters is Mark Kantrowitz, senior vice president and publisher of, a web site about planning and paying for college. He is also co-author of the bestselling book, “Filing the FAFSA,” which is available for free download at

By Mark Kantrowitz

It is the season of crushed college dreams. Even when your high school senior is admitted to a top college, you may have to tell him or her that you cannot afford to pay for it. Your student got in — Yay! — but the college is denying him or her the financial aid needed to afford to enroll without graduating with an unreasonable amount of student and/or parent loan debt.

But, first, you and your child will have to decipher the financial aid award letters. For students who apply for financial aid and are determined to be eligible, the financial aid award letters arrive in late March or early April, at about the same time as college admissions decisions. Some colleges have well-designed financial aid award letters, but many award letters are incredibly confusing and, perhaps, deliberately arcane and obtuse.

Financial aid award letters are often viewed as marketing documents, not counseling tools. They are designed to convince the family that the college costs less and is more affordable than it really is.

College financial aid administrators don’t like comparisons with car dealerships, but, frankly, you may get more honesty from the car salesman. With car dealerships, at least, federal law requires a standardized Monroney Window Sticker and prohibits mischaracterizing loans as discounts on the car’s cost. Car dealerships don’t have the chutzpah to claim that the car has no net cost because it requires zero down, yet this is precisely the sort of nonsense that is commonplace in college financial aid award letters. The Financial Aid Shopping Sheet, a voluntary standard recommended by the federal government, has been adopted by less than one-third of the nation’s colleges and universities. The colleges with the most egregious practices have so far refused to adopt the Financial Aid Shopping Sheet and are unlikely to do so until it is required by law.

Beware of the following five key flaws that appear in the majority of financial aid award letters:

  1. Missing or inaccurate sticker price. Most financial aid award letters do not list the college’s total cost of attendance including tuition, fees, books and supplies, room and board, transportation, and personal/miscellaneous expenses. Instead, they try to get you to focus on the amount of aid you will be receiving. If they do list a cost figure, it may be limited to direct costs, like tuition, which are paid to the college and exclude indirect costs, like textbooks, which are paid to third parties. A comprehensive fee may not be all that comprehensive, omitting key costs. When the cost of attendance figure includes allowances for textbooks and transportation, the allowances may be significantly underestimated.
  2. Blur distinction between grants and loans. Often, award letters will mix together a list of grants and loans, without any clear signals of how to distinguish the different types of financial. Loans are listed with just a dollar amount, without information about interest rates, fees or monthly payments. The loans aren’t even labeled as loans. The name of the award may include just an “L” or “LN” to indicate that it is a loan, which presupposes that the family already knows that the loan is a loan. Just because a loan is awarded based on demonstrated financial need doesn’t mean it should have special status on the award letter. A loan is a loan is a loan. It does not cut college costs. In most cases, a loan will increase college costs, because loans must be repaid, usually with interest. Colleges often talk about loans as making college more affordable, but few, if any, colleges track the percentage of their students who graduate or drop out with unaffordable debt.
  3. Fuzzy math. Colleges often refer to a net cost figure, which is the difference between the cost of attendance and the entire financial aid package. But, the financial aid package includes loans, which do not cut college costs. The real cost of college may be much higher. The net price is a more accurate estimate of the bottom-line cost. The net price subtracts just gift aid – grants, scholarships, tuition waivers and other money that does not need to be earned or repaid — from the cost of attendance. The net price is a discounted sticker price.While one might consider gapping – leaving the student with unmet financial need – as another flaw in financial aid award letters, most of the colleges that claim to meet the student’s full demonstrated financial need are doing so by redefining financial need or by counting loans as meeting need. What really matters is the net price, since that is the amount of money the family will have to pay from savings, income and loans to cover the college’s annual costs.
  4. Front-loading of grants. At most colleges, the financial aid award letter is for just one year at a time, not all four years. About half of all colleges practice front-loading of grants, where the mix of grants and loans may be more favorable during the freshman year than during subsequent academic years. The net price may be thousands of dollars higher during the sophomore, junior and senior years. Let’s be honest, this practice is, in reality, just a form of bait and switch.To tell whether a college practices front-loading of grants, expand the financial aid tab for the college’s listing in Compare the percentage receiving “Grant or scholarship aid” and the average grant amount for first-year students and for all undergraduate students. If there is a significant difference, it may be a sign that the college practices front-loading of grants.
  5. When a student wins private scholarships, the scholarships reduce the student’s demonstrated financial need. The college must, then, reduce the need-based financial aid package to compensate. Colleges have some flexibility in how they reduce the need-based financial aid package. They can choose to reduce loans instead of grants. If the private scholarship replaces student loans or student employment, then the net price will decrease. If the private scholarship replaces just grants or other scholarship aid, the net price remains unchanged, yielding no net financial gain for the student.

Certainly, when a family has unusual financial circumstances, they should ask the college financial aid administrator for a professional judgment review to appeal for more financial aid. Appealing for more aid may help make the college more affordable, but, the adjustment to the financial aid package may be little more than a temporary reprieve, since most schools award aid one year at a time.

One of the most problematic practices involves the packaging of unsubsidized loans, like the unsubsidized Federal Stafford loan and the Federal Parent PLUS loan. While packaging these loans makes families aware of these loans as options for financing the net price, often they yield a net cost figure that misleads the family. If the Federal Parent PLUS loan amount is the same as the net price, it may make the family think they are getting a free ride from the school because the net cost is listed as zero.

Even more pernicious, however, is a practice that packages the Federal PLUS loan for less than the remaining net price, yielding a non-zero net cost figure that looks like a reasonable amount that the family could afford. But, the family doesn’t realize that most of the financial aid that yields this net cost figure is loans, not grants, so the real cost to the family is much, much higher.