Understanding Your Financial Aid Offer: A Guide for Parents and Students
For many families, receiving a financial aid offer from a college is an exciting but overwhelming moment. While it’s great to know what kind of aid is available, the format of these letters can be confusing, inconsistent, and even misleading. If you're new to the college financial aid process, you might not know how to interpret the numbers, compare offers, or determine the actual cost of attendance.
This guide will break it all down:
What a financial aid offer is and what it includes
The role of the Student Aid Index (SAI) and financial need
Common pitfalls and misleading language in aid letters
How to compare offers and determine the true cost of college
For a more comprehensive resource on College Admissions and examples of confusing Financial Aid Offers, check out Cogi's Guide
By the end of this article, though, you’ll know how to navigate financial aid offers and make the best decision for your family’s budget.
What Is a Financial Aid Offer?
A financial aid offer (also called an award letter or financial aid package) is the document a college sends after a student is accepted, outlining the financial assistance available for the upcoming academic year.
This offer may include:
Grants and Scholarships – Free money that does not need to be repaid
Federal Work-Study – A part-time job opportunity on campus (this can be misleading - read below)
Federal Student Loans – Borrowed money that must be repaid after graduation
Parent PLUS Loans or Private Loan Options – Additional borrowing options that may be suggested by the school
At first glance, a financial aid offer might seem generous—but not all aid is equal. Understanding what is “free money” and what requires repayment is key.
Cogi InSight - Important: Colleges are not required to format these letters the same way, making it difficult to compare offers across schools. Some letters clearly label each type of aid, while others lump grants, loans, and work-study together, making it seem like more free aid than there actually is.
What Are SAI and Financial Need? (And What They Are Not)
The Student Aid Index (SAI) is a number used by colleges to determine a student’s eligibility for need-based financial aid. It replaced the Expected Family Contribution (EFC) starting with the 2024-25 FAFSA cycle.
A. What is SAI?
SAI is NOT the amount your family has to pay for college.
SAI is NOT a guarantee of aid from the school.
SAI is a calculation of what the government believes your family can afford, assuming significant sacrifices, to pay for college that year, and it's based on your FAFSA information (family income, assets, household size, etc.).
B. What is Financial Need?
A student’s financial need is calculated by: Cost of Attendance (COA) − SAI = Financial Need
Cost of Attendance (COA) – SAI = Financial Need
Financial need determines eligibility for need-based aid (like Pell Grants and subsidized loans) and colleges use it to determine how much aid they will offer a student, which could result in the student paying more or less than their SAI.
If your SAI is low, you may qualify for more grants and need-based scholarships.
Even if you have high need, schools are not required to meet 100% of it.
Cogi InSight - Keep in mind: Most schools "gap" students, especially those from middle class families, meaning they don’t offer enough aid to fully cover financial need, leaving families responsible for the remaining balance.
Why Are Financial Aid Offers So Confusing?
As mentioned earlier, Colleges are not required to design these letters the same way, them to vary wildly in format and clarity. The result makes them very difficult to compare. Here are some common issues that trip up families:
A. Loans Disguised as Aid and Loan Fees Not Included
Many schools list student loans alongside grants and scholarships, making the total aid package appear larger than it actually is. They almost always leave off loan origination fees, as well. Remember: Loans have fees that are deducted from the disbursment and the entire loan must be repaid with interest.
Cogi InSight - Important: Separate loans from true gift aid (grants/scholarships) to understand what’s actually reducing college costs. Also, read Why Debt Matters Day 1!
B. Missing the Cost of Attendance (COA)
Some colleges omit the full cost of attendance (COA) in the financial aid letter, making it harder to determine your actual out-of-pocket costs. Additionally, COA's are general estimates and don't take into account the costs of a given student's expenses.
Cogi InSight - What to Do: Look up the total COA on the college’s website and subtract your grants/scholarships to find your real cost. Better yet, use Cogi's College Cost Comparison Tool to calculate a precise budget and see what the "True Net Cost" is for each school.
C. Work-Study as Guaranteed Aid
Federal Work-Study is not guaranteed cash upfront—students must find and work a job to earn this money. However, many schools present it as a defined amount and subtract it from their Net Cost.
Cogi InSight - What to Do: Don’t assume work-study funds will cover immediate tuition costs. Treat it as potential job income, not tuition relief.
D. Inconsistent Formatting
One college may clearly label grants, loans, and work-study separately, while another may mix them together in one lump sum.
Cogi InSight - Create your own comparison table (see below) to standardize the data or use Cogi's College Cost Comparison Tool (free)
How to Make Sense of Your Financial Aid Offer
The best way to decode your financial aid offer is to organize it into a clear table separating different types of aid.
Step 1: Gather Key Numbers from the Offer Letter
Find the following:
Total Cost of Attendance (COA) (tuition, fees, room, board, books, personal expenses)
Gift Aid (Grants & Scholarships) – Free money
Work-Study (if included)
Loans (Subsidized, Unsubsidized, Parent PLUS, Private)
Step 2: For a simpler comparison, organize the Information into a Comparison Table, with a Column for "Financial Aid Components" Below are the row items to go under "Financial Aid Components". Next to the column for Financial Aid Components, you'll list a row for each college you're accepted to and received a financial aid offer letter from.
Under "Financial Aid Components" list:
Total Cost of Attendance (COA)
Grants & Scholarships (Do not Repay)
Work-Study (If Applicable)
Federal Student Loans (Must Repay)
Parent Loans / Other Loans (If Listed/known)
Net Cost (COA - Grants/Scholarships Only)
If you want to get a more accurate picture and compare the "true Net Cost" of each college and what kind of budget you and your student will be looking at, check out Cogi's Calculating College Costs Tracker!
Cogi InSight - Compare the net cost, not just the aid amount: A college offering $20,000 in aid on a $50,000 tuition still costs more than one offering $12,000 on a $35,000 tuition.
Final Tips for Comparing and Negotiating Financial Aid
A. Ask for More Aid (Appeal the Offer!)
If your financial situation has changed (job loss, medical expenses), contact the financial aid office to request a reconsideration.
If a competitor school offered a better package, some colleges match or increase their aid—it’s worth asking!
B. Look Beyond the First Year
Some scholarships only apply to the first year. Check if your aid package is renewable for all four years.
Find out the GPA requirements to keep merit scholarships—some require a 3.0 or higher.
C. Don’t Borrow More Than You Can Afford
Federal student loans are usually the best borrowing option (lower interest, flexible repayment).
Parent PLUS loans and private loans can lead to significant long-term debt—borrow cautiously.
Key Takeaways:
Navigating financial aid letters can feel overwhelming, but breaking them down into clear categories makes it easier to understand the real cost of college.
Don’t assume all aid is free money—separate loans from grants/scholarships.
Compare net costs, not just total aid amounts.
Look for missing COA information and misleading loan listings.
Consider appealing for more aid if circumstances change.
Financial aid can be complex, but you don’t have to navigate it alone. A little knowledge goes a long way in making college affordable and manageable! With clear financial knowledge and smart comparisons, you can make informed decisions about which college is the best fit financially—not just academically.