No two financial aid offers look alike, and reading them as-is won’t always tell you what you really need to know: what’s the bottom-line, out of pocket cost? Use these helpful tips to review and understand financial aid offers so you can make an informed, affordable school selection decision.

Here are five things we want borrowers to know:

1. Know the cost.

An aid offer may contain a few- or a lot- of types of aid, but in order to determine how affordable a school is, you need to understand how that aid compares to the cost. We recommend focusing on the direct costs. Direct costs are the expenses that will be billed to you by the school and include tuition and fees, as well as room and board if you plan to live on campus. Direct costs vary dramatically by school. Some aid offers list the costs, while others do not. If no costs are listed, visit the school’s website and search for cost of attendance.

2. Understand the types of aid offered.

There are two broad categories of financial aid: gift aid and self-help. Gift aid includes grants and scholarships, which are funds that do not have to be repaid. Self-help types of aid include federal student loans and work-study. Federal direct student loans are available to virtually all students and must be repaid (though many repayment and potential forgiveness options exist). Work-study offers are funds that students can earn by working, typically on-campus. Some financial aid offers also include PLUS or private loans, which are credit-based, so we recommend excluding those when comparing financial aid offers.

3. Use FAME’s Comparing Costs and Aid Offers worksheet.

Figuring out the bottom-line cost requires a little bit of math. You may not be able to tell what the cost will be just by looking at the aid offer. In order to make this process more clear, FAME created a Comparing Costs and Aid Offers worksheet, where you can side-by-side compare your financial aid offers and see the bottom line clearly. This worksheet even does the math for you! Be sure to check out the “net cost before loans” to see what the school actually costs. Then, if borrowing is part of your plan, subtract the federal student loan to see the estimated remaining out of pocket cost.

4. Consider cost of entire program.

Once you have determined the cost for the first year, make sure you also consider the cost of the entire program, especially if you plan to borrow loans. Multiply the “net cost before loans” from the worksheet by length (number of years) of the degree program. Assume that there will be some cost increases. Consider how much of that may need to be borrowed for your program. A good rule of thumb is to keep borrowing to no more than your annual starting salary when you graduate.

5. Ask questions!

Since aid offers all look a little different, there can be some confusion. If you received a scholarship or grant, it’s important to know why you got it and how to keep it. If you’ve been offered a scholarship, ask if it is renewable, and if so, under what circumstances. If there is something you don’t understand, ask questions! Choosing a college is one of the biggest financial decisions a person can make so it is important to understand short and long-term costs as you make your decision. Reach out you school counselor, the financial aid office, or FAME to get your questions answered. You can also learn more about financial aid by visiting our website.

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