Many times — maybe too many — high school seniors are just so happy to be accepted to their dream school that they don’t give a second thought to the financial implications of their college choice. Then reality sinks in when they start digging into the details of college award letters.

At College Parents of America, we aim to promote greater transparency by schools and understanding by families.  Each year there are articles that describe the problems and provide advice.  Most recently ab article said that ‘deciphering financial-aid letters is almost impossible for students and parents looking at them for the first time. They often use difficult-to-understand abbreviations and mix together loans and grants, blurring the lines between the two and creating confusion. They usually include loans, both subsidized (meaning interest isn’t charged while the student is in school) and unsubsidized before they get to the bottom line of what families are still expected to contribute. Often that contribution will require students and parents to borrow even more.”

In a comprehensive article by Maggie McGrath in Forbes, Mark Kantrowitz, says that “Parents should not need a PhD in economics to read financial aid award letters. But until Congress decides to make the college shopping sheet mandatory, they’re going to need help.”   Financial experts say you want to take a hard look at what’s really being offered in an award letter. Is it a free ride or a bundle of college debt?  Some questions to ask:

1) Clear as Mud?  What’s your actual price for a school? 

One mistake that some families make is focusing on the total dollar amount listed for the aid package on an award letter, said Karen McCarthy, director of policy analysis for the National Association of Student Financial Aid Administrators.   And then, they compare that number across institutions.  “But a $10,000 award from one school that’s offering a grant or scholarship is very different from a $10,000 loan,” she said.

“The net price is the true bottom-line cost that you can use to compare college affordability,” said Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.  Net price takes into account your cost after any grants and scholarships. “Net cost and net price do not necessarily show up on the award letter,” Kantrowitz said. “That’s one of the problems.”

The U.S. Department of Education notes that students can use these calculators to enter information about themselves to find out what students in similar situations paid to attend the institution in the previous year, after taking grants and scholarship aid into account.

2) Beware of “front-loading evaluate the four-year cost

College Parents should read the award letter carefully to understand the four-year cost of attendance.  Discuss the letter with your college student.  Identify any of the award or scholarship money that is “front-loaded” for the freshmen year that could start to decrease after freshman year.

We are big fans of College Navigator, a free tool provided by the National Center for Education Statistics.  This tool helps families to search a school you’re considering and see that school’s financial aid information. There are two sections within the financial aid section.  Notice what the typical financial aid for first-year students is and also note the financial aid for all undergraduates. The Forbes article reminds us that “If the average grant in the “beginning” students is significantly higher than the average grant size for all undergraduates, it’s a sign that school frontloads its grants.”

3) Don’t be Surprised – Be Clear on The Rules

Some schools include awards or scholarships that are contingent upon maintaining a minimum grade-point average.  So it is vital to understand the rules of the game. Is the free money (money you don’t have to pay back) for one year or all four years.    Rohit Chopra, student loan ombudsman and assistant director of the Consumer Financial Protection Bureau, who says “that it’s not always clear to students that even if they maintain a required GPA, the school still has the right to reduce the scholarship amount in subsequent years. It’s at the discretion of the school. Chopra advises, adding that if you ask about this, schools should be able to provide an answer about the likelihood of a scholarship declining or disappearing altogether.”

4)  Know your expected family contribution and realize it is subject to change

College Parents often think that having two kids in college at the same time is twice as expensive as having one, but that isn’t true. McGrath’s article suggests that “both school aid and federal grants (but not unsubsidized loans) are based on expected family contribution (EFC), and if there are multiple siblings in college at the same time the EFC is divided by the number of college-aged kids. That’s how the Free Application for Federal Student Aid (FAFSA) formula for assessing your need works.  But if you’ve applied to one of a few hundred elite and pricey schools you’ve likely also completed the College Board’s CSS Profile in addition to FAFSA. Schools using that form and what’s known as the “institutional aid” formula typically expect a family to kick in 120% of the EFC if two siblings are in school at the same time — or 60% of the EFC for each.”

5)  Look beyond your school for money to help reduce the cost of college

There are many sources of funds that are independent of the college or university your child may choose to attend.  Our favorite scholarship service is provided by Scholarship America that administers scholarship programs independent of specific colleges and universities. Remember do not pay for a scholarship service and take care of sites that are mostly looking to sell your students information.  Many college parents actually require their students to complete scholarship applications.  There are lessons contained within scholarship applications and it often can inspire your student to consider new fields or recognize the value of doing well both inside and outside of the classroom.

In fact, Chopra also suggests that “parents and students not to allow worries about scholarships reducing other grant money to keep them from pursuing outside scholarship. “I sometimes feel like a lot of media outlets concentrate on this issue too much. We shouldn’t do anything to discourage people from applying for scholarships. A scholarship is money that doesn’t need to be paid back. Often it will lead to fewer loans you need to take out.”

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