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Making Sense of Financial Aid Letters and “Unmet Need”

Update, March 2016: With the first acceptance and award letters just a month away, now's a perfect time to review this post about understanding financial aid letters and unmet need.

This spring, college acceptance letters likely rolled in to your son or daughter's inbox, solidifying the hard work that went into his or her high school years. Now that you've celebrated, what's next?

Along with those acceptance letters comes the financial aid letter, a document that outlines the cost to attend a college or university, as well as the federal, state and school-funded awards to help pay for it. The dollar amount offered in a financial aid letter makes it a powerful piece of correspondence that has the potential to make or break enrollment decisions. (If you don't like what you see, appealing your financial aid package may be worth pursuing. CollegeUp.org has a helpful blog post geared toward students on how to write a financial appeal letter.)

 Although financial aid letters vary from school to school, there's one important phrase that your family should consistently be thinking about related to them, and that's unmet need. Unmet need is the amount that's left to be paid after financial aid is awarded. It's the amount that your student can actually afford to pay. Here's a helpful sample financial aid letter from Kiplinger:

 (Click here for the full interactive tool.)


In this example, unmet need requires some calculation. The Cost of Attendance (COA) is $38,250, and the Expected Family Contribution (EFC) is $4,500. The EFC can be combined with grants and scholarships -- the best kind of awards to accept -- as well as Federal Work-Study to get a total of $19,926 in financial aid.

 But do you notice something that's intentionally vague in this letter? The bottom of the letter makes it seem like the awards total $38,250 -- enough to cover full tuition! Upon closer look, you'll see why that amount is misleading: the $19,926 in grants and scholarships doesn't need to be repaid, but all of the loans do. And, as we've previously covered, student loans can leave your student with considerable debt after graduation. (Not to mention, private loans are one of riskiest ways to finance a college education, according to the Institute for College Access & Success.) The awards list doesn't separate these options, so it would've been up to the family to figure out if they really want to rely on loans to cover the $13,824 in unmet need.

 Knowing your kid's unmet need doesn't affect just them; it affects the family's contributions, too. By understanding the financial aid process, including knowing about the Free Application for Student Financial Aid (FAFSA) and financial aid terms, you'll all reap the benefits, including:

Reducing confusion surrounding your family's unmet need. Financial aid letters can be confusing. They vary by school, they can be hard to interpret and, with so much money at stake, they may make your son or daughter overwhelmed about the cost. This is where you can help your kid: Compare financial aid letters from each school of interest to determine what each one will really cost. Equipping yourself with financial information -- and knowing what you can contribute -- will help the entire family.

Creating a plan of attack. Most schools don't have the funds to cover the financial needs of every student enrolled. Rather than being surprised by the unmet need, you'll be ready to discuss different ways that your student can pay for the rest of tuition -- including the benefit of "free money," like grants and scholarships. You'll notice on the sample letter above that private scholarships -- those from businesses, competitions and organizations like Dollars for Scholars -- aren't listed, and those can go a long way toward reducing unmet need.

Preventing missteps down the road. Researching and discussing financial aid lessens the stress of unmet need once it's actually time to cut checks. It'll also lay the groundwork for future conversations with your son or daughter about the following year's tuition and fees. Unmet need doesn't end after one conversation; a financial aid package covers just one academic year. There's no guarantee that the amount of unmet need will be the same year after year, but it pays to know about unmet need now.

Supporting your student's higher education journey is one of the biggest investments you'll make, so we can't afford to be uninformed. But with preparation, we can all help students achieve the gift of higher education.


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Posted in dollars for scholars, financial aid, financial aid for parents, private scholarships

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