How to understand your financial offers 

 

After school acceptance letters have arrived, you'll begin to receive financial aid offers either by e-mail or by letter from each school. The offers will be based on the information on your FAFSA and on other forms that each school may have asked you to submit. 

The offers are all going to look different, because each school has its own financial aid, in addition to the aid it provides from the federal government and nonprofit state agencies like VSAC. And each school has different financial aid policies for offering this money.

There's a lot to understand, but we'll make it easier. If you have questions after this process, contact us Monday–Friday, 8:00 am–4:30 pm

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a VPR podcast featuring a Vermont student who's reviewing 4 college acceptances and VSAC staff who discuss available resources to help guide her—and you—through the process.

Breaking Down the Language

There is no standard form for these offers, which is why each one will look different and may even use different words to refer to the same kinds of aid. 

The one thing they'll have in common is that they may include any or all of the following:

  1. Grants, scholarships, or merit aid (free money known as "gift aid" that doesn't need to be paid back)
  2. Loans (borrowed money that you'll need to repay with interest)
  3. Work-study (which will require that you work a certain number of hours each semester)

Make sure you understand all of the vocabulary in the offer. If you need help, here's a list of words to look for, along with their definitions. 

WHAT'S MERIT AID?

Merit aid is free money from a school. It isn't based on financial need. Instead, it is given to students who have academic, athletic, or artistic skills. It could also be given to students who meet certain traits that the school is looking for. For example, a school in New England might want to encourage a student from a different part of the country to attend, so it might provide merit aid as an incentive.

In the first example here, the Alumni Grant might be merit aid from money that the school's graduates have contributed to help students pay to attend.

WHAT'S WORK-STUDY?

Federal work–study funds provide part-time jobs (mostly on campus) for college students with financial need, allowing them to earn money to help pay education expenses. On your FAFSA, you can choose whether you want to be considered for Federal Work–Study. If you see it on your financial aid offer, check with your college to see when and how you receive your job placement.

free money versus loans

Understand the Differences

In addition to the way schools provide their costs of attendance, you may notice differences in the way schools refer to their free aid and their loans. 

Vermont Grant — You might see this listed as the: 

  • Vermont grant (because the money comes from the Vermont Legislature)
  • VSAC grant (because VSAC administers the grant and students must apply for it through VSAC)
  • Incentive grant (the name of the specific grant for full-time students)

These aren't 3 different grants; they're just 3 different ways that schools might refer to Vermont's state grant.

Federal Student Loans

Likewise, you might see different names for federal subsidized and unsubsidized student loans, because the name of the loan program has changed over the years: 

  • Both of these loans are currently called Federal Direct loans.
  • Schools might list them as Stafford loans.
  • You might even see them listed as Ford loans.

If you have any questions about the types of aid on your offer, call the school's financial aid office.

Spot the differences

In the two examples here, the same state grant is listed with different names (Vermont grant and VSAC grant). The federal loans are also the same, even though the first offer calls them Direct loans and the second offer calls them Stafford loans.

Can you spot another difference in the way the 2 examples refer to the same federal grant?

differences in financial aid offers

What's a PLUS Loan?

You're probably going to see federal Direct student loans (subsidized and/or unsubsidized) on your financial aid offer. For these loans, only the student is the borrower and is responsible for repayment. 

But what if your offer includes a federal Direct PLUS loan? This is a loan for parents—the parent is the only borrower for  PLUS loans and the loan cannot be transferred to the student.

Some schools will include a PLUS loan in a student’s financial aid notification; others won’t. Parents, it’s your choice whether or not to borrow some or all of the amount offered. Federal PLUS loans have flexible repayment options, such as deferment during periods of hardship, but PLUS loans—unlike federal Direct loans for students—may have higher interest rates than available alternatives.

Before borrowing the PLUS, pause and shop around for a loan with the best rate and other benefits for your situation. We show you how >

Do you qualify for a PLUS loan?

If your student is offered a PLUS loan, you as the parent will need to submit a separate application in order to determine whether you're eligible. If, as a parent, you're denied a PLUS loan, your student may receive an additional amount of up to $4,000 in a federal Direct loans for the first 2 years of college, then an additional $5,000 for the second 2 years.

what are plus loans

So you've gone through all your offers and have separated free aid from money you'll have to borrow. The next step in making your college decision is to crunch the numbers and compare all the offers. This will help you identify the school that gives you the best deal when compared with its cost of attendance.

NEXT: Crunch the numbers in each offer >