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How to Make Sense of Your Financial Award Letter

So you’ve finally finished your FASFA (Free Application for Federal Student Aid) and you’re getting ready to start college. Eventually, you will get a letter or e-mail telling you how much financial aid you will get for school. This letter is known as an award letter,  and can be a little confusing when you’re just starting your college career. So here is a breakdown of some of the things you need to know to understand your award letter.

1.      There is a BIG difference between a loan and a grant. A loan is money that is given to you that you will have to pay back. The most popular loans for NJ college students are:

·         Subsidized Direct Loan – This loan comes from the federal government. It does not collect interest while you’re in school. (See below for the definition of interest).

·         Unsubsidized Direct Loan – This is very similar to a subsidized loan except an unsubsidized loan does collect interest while you’re in school.

·         Parent Plus Direct Loan – This loan has to be taken out by your parent(s) and they are expected to pay it back themselves.

·         Stafford Loan – This loan comes from the federal government and can change amounts depending on what year you are in at school.

·         Federal Perkins Loan – This loan is federally funded and is run through your school. You are required to pay your school back for these loans.


2.      There is a difference between federal grants and state grants. A grant is money that is given to you for school that you do not have to pay back.

·         Pell Grant – This grant is federally funded and is usually only offered to undergraduate students.

·         Tuition Aid Grant (TAG) – A TAG is a state funded grant that can be used towards your tuition. This grant requires you to fill out the state aid portion at the end of your FASFA in order for you to be eligible to receive it.

·         Supplemental Educational Opportunity Grant (SEOG) – This grant is campus-based. Check to see if your school participates in this program

·         Educational Opportunity Fund (EOF) – Your acceptance to your school of choice may be based on your acceptance to this federally funded program. EOF often requires participation in a summer program for incoming first-year students. Many EOF programs provide you with experienced one-on-one academic counselors, networking support, and discount book and calculator rentals.

·         Federal Work Study Program (FWSP) – This program provides you with a job on campus that can help you pay for your tuition. The chances of getting into FWSP depend on your financial need and the amount of job openings your school has. There is a set amount of money a student can make each semester that they work (usually around $1,000).


3.      Scholarships are different from loan and grants because they can come from just about anywhere. Usually you are required to apply individually for scholarships. If you will be receiving a scholarship, make sure you notify your school’s financial aid office.


4.      ECA stands for Estimated Cost of Attendance. This is the grand total of all the expenses you will have to pay to go to school. This may include lab fees, book purchases/rentals, and student activity charges.


5.      EFC stands for Estimated Family Contribution. This is the amount of money your school expects you and your family to pay towards your tuition. This doesn’t mean you have to pay out-of-pocket but that it is up to you to find a way to cover the cost.


6.      Interest is the cost of borrowing money, and it is normally expressed in terms of a percentage. Not only will you have to pay back the original amount of money borrowed, but you’ll also have to pay back the cost of borrowing that money (the interest).  How much interest you have to pay on a loan depends on whom you borrow the money from and the rate and timeframe of the loan.