Along with acceptance and rejection letters, colleges are sending out another nerve-wracking piece of mail this month: the financial aid award letter.  For many families who have only recently discovered the "joys" of completing the FAFSA, the financial aid letter can bring about a whole new kind of terror and confusion.  Even for people who are somewhat familiar with aid, deconstructing the naming conventions and occasionally less-than-detailed explanations on various colleges' award letters can be frustrating, as can mounting an effective comparison among differing aid packages.  Below is the first part in a series on understanding your financial aid award letter.

Understanding Your Financial Aid Award Letter, Part I: COA and EFC

Two of the most important numbers on your award notice will be the cost of attendance (COA) and the expected family contribution (EFC). These are instrumental in determining your award, and they also have some of the most obscure and misleading meanings. Despite their prominence, they're occasionally tucked in strange places on the letter, such as near the bottom or in a box in the middle. Finding them can kind of be a Where's Waldo moment.

Cost of Attendance

The cost of attendance, often abbreviated COA, is occasionally referred to by other names, such as your "budget."  This number is not what you owe the school, nor what a year of education will necessarily cost you there. Instead, it is the average amount paid by a student in your situation: dependent living on campus, independent living off-campus, part-time living rent-free at home, etc. The COA will include tuition, student fees (these could change if you later register for classes with special fees, such as art or aviation), room and board (either what the school is charging you or what the average student in your housing situation pays), books, and miscellaneous living expenses.  Your school's financial aid office will likely have a detailed breakdown of this number available online or in the office if you ask.

The important thing to realize here is that this number is significantly higher than the amount of money you will actually owe the school. If you plan on working your way through college or receiving assistance from your parents for living expenses, you may not need aid to cover your full COA. It can still be a good tool for comparing among colleges, though, especially since they factor in handy things like average living expenses in the area.

Expected Family Contribution

The other big number on your award letter will be the expected family contribution, or E FC. Again, this is not the amount your family actually owes the school or is expected to pay out-of-pocket. Instead, this is the amount that, according to the information you submitted on your FAFSA, a family in your situation should ideally be able to contribute towards a college education. This is used to determine your eligibility for "need-based" aid, which includes state and federal grants, work-study, and even subsidized loans. Certain grants and scholarships can only be awarded to students with an EFC below a specific number (for example, 4671 for Federal Pell Grants), so if you are not eligible for grants but your financial circumstances have changed since 2008, talk to your financial aid office to see if your EFC can be adjusted downward.

Your EFC should be the same at pretty much every school, since they're using the same information to determine it (some schools require both a FAFSA and a CSS profile, so there could potentially be some differences).  However, it's still useful for comparisons among schools, since you can use it to determine whether your full "financial need" has been met by each school. Like nearly everything else in student financial aid, this term does not necessarily mean what one might think it should mean. Your financial need is a number calculated based on the two numbers we just discussed.  Your full financial need is your COA minus your EFC, and your unmet financial need is generally your COA minus your EFC minus any need-based aid and scholarship awards you've received.

So, how do you determine what the need-based awards and scholarships are on your award letter?  Check out Part II for that information.

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