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College Affordability and Preparedness

How to Decipher Your Financial Aid Offer

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College financial aid offers can seem like a foreign language to students and families. But knowing a few key terms can make them easier to understand and compare.

Justin Draeger

President & CEO, National Association of Student Financial Aid Administrators (NASFAA)

With the college application season upon us, millions of students will begin the exciting but daunting process of enrolling in college for next fall. Navigating your way through college admissions can be an overwhelming experience, and rightly so — deciding to go to college is one of the first and most significant financial decisions a person can make.

But the excitement of being accepted can quickly be overshadowed by the complexity of how to pay for it. Our system for paying for college in this country is complex, to put it mildly. It involves  pulling together a mixture of federal and state grants and loans, and private and institutional scholarships, not to mention work-study, fellowships, internships, and other one-off sources of funding that hopefully come together to make college affordable. 

The web of multiple payers and funders often results in confusing financial aid offers from colleges and universities, with jargon and abbreviations that can seem like a foreign language  to students and their families.

Because each college has its own unique student population and its own process for distributing financial aid, the way they communicate those offers with students can also be difficult to compare.

Recognizing the need for clarity and greater understanding, hundreds of colleges and universities across the country are banding together to commit to a common set of principles and standards in communicating their financial aid offers through a movement known as the College Cost Transparency Initiative

While each aid offer might look slightly different, each partner school has committed to using the same terminology and other standards, making it easier for students and families to understand and compare multiple financial aid offers.

Here are five key terms from the College Cost Transparency Initiative’s Financial Aid Glossary to help students and parents understand and compare a college financial aid offer:

  • Cost of Attendance: The sum of educational costs payable to the school (also referred to as direct or billable costs) and costs paid to others (or indirect, non-billable, or discretionary) costs. The Cost of Attendance represents the highest dollar amount of financial aid a student can receive during an award year.
  • Net Price: The difference between the cost of attendance and all grants and scholarships. Net price reflects what the student is expected to pay for their education on their own and can be covered through a variety of sources, including savings, student employment, institutional payment plans, or education loans.
  • Student Aid Index (SAI): The SAI will replace the Expected Family Contribution (EFC) starting with the 2024-25 FAFSA as the index used to determine your eligibility for federal and, in some instances, state and institutional need-based student financial aid. Generally, students with a higher EFC/SAI are eligible for less need-based financial aid. It is based upon the information provided by the student and their family on the FAFSA.
  • Costs Payable to School: Also referred to as direct or billable costs, these expenses generally include tuition, fees, housing, and meals/food (for students residing on campus), health insurance (if minimum insurance coverage is not documented), or any other expenses paid to the school for enrollment.
  • Costs Paid to Others: Also referred to as indirect, non-billable, or additional costs, these are other expenses not paid directly to the school, but associated with receiving an education. These expenses are estimated by the school and may differ from student to student based on their individual circumstances. These expenses may include books, course materials, supplies, equipment, transportation and parking, personal expenses, child care costs, computer costs, disability expenses, licensure expenses, and off-campus rent and food.

The first step in making college more affordable is giving students and families the information they need to make the financial decisions that are right for them. Learn more about the College Cost Transparency Initiative, including which schools have joined, and review the initiative’s sample financial aid offers and full financial aid glossary online. 

Justin Draeger is president and CEO of NASFAA, located in Washington, D.C. He serves as the primary voice of NASFAA and as the liaison between the association members, the U.S. Congress, federal agencies, and the media. Most of Justin’s career has been devoted to assisting disadvantaged populations achieve their educational goals and better their communities. Since 2002, Justin has been engaged in either administering, interpreting, communicating, or developing student financial aid policy. Justin has testified in multiple congressional hearings on student financial aid, college access, student loan policy, and the interplay between federal agencies, and colleges and universities. He earned his bachelor’s degree from Brigham Young University and his M.B.A. from Baker College.

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