Millions of students across the country are in the process of deciding which college they’ll attend this fall. And in making that decision, one of the most significant factors will be cost. The average out-of-state public college tuition for the 2013-2014 academic year was $8,893, according to the The College Board. That’s a hefty sum, and doesn’t even include the cost of room, board, books, fees, travel and living expenses… let alone the hike in tuition if a student attends a private or out-of-state college.

To help students and their families make sense of all of this, and how to pay for it, institutions send out what’s called a “financial aid award letter”—a sometimes cryptic document that details how much college will cost you and if your school is willing to help foot the bill with grant,s scholarships and loans.


If you’re one of the lucky students who’s got more than one college to choose from, here’s how to navigate awards letters and compare costs.

Identify the Real Cost 

Every school’s award letter is different. To make an apples-to-apples comparison, your first step is to calculate the total cost of attending each institution. Again, this means more than the cost of tuition. You should also factor in fees, books, living and transportation expenses, and room and board. Many institutions will list the average cost of those things for students in the award letter, but not all do. To get a complete account, it’s probably best to consult each school’s admissions or financial aid advisor, whose job it is to help you calculate costs.

Evaluate Funding Options

Most students meet their financial obligations through a mix of funding sources. Armed with your total cost of attendance, identify every source of funding available to you at each school. Grants and scholarships are often listed together in award letters as “gift” aid, because they’re funds you won’t have to pay back. Gift aid is especially important in making a comparison, because it’s a funding source that will differ most from school to school, as colleges often offer scholarships and grants exclusive to their institution.

Subtract your gift aid at each school from its total cost of attendance. When that’s done, you’ll be left with a clear idea of your net cost—or what you’re expected to cover out of pocket through federal loans, work study, private or institutional loans.

That brings us to the hard part: loans. Nearly 20 million Americans attend college every year. More than half—12 million or 60%—borrow to help cover costs. It’s an uncomfortable fact of the American higher education system that many go into debt for an undergraduate degree. But not all student loan debt is created equal.

You probably know by now that there are different types of student loans: private, federal and institutional (loans offered by the college). They differ most by their interest rates and your eventual options for repayment. The award letters for each school should list exactly how much you can take out in federal and intuitional loans. (Private loans are up to you and a lender.) With that, you should have a complete picture of your financial situation at each prospective college and be ready to compare.

Plot It Out

Finally, perhaps the most difficult thing about comparing financial aid award letters is the math. It’s more than just simple subtraction of the total aid from the total cost and making it to zero. You’ll want to be sure you’re getting the full benefit of gift aid and otherwise getting the most bang for your buck. That can be hidden in the bottom line.

Luckily, the good folks over at the Consumer Financial Protection Bureau have a handy comparison tool that calculates everything in a simple side-by-side format. Their College Scorecard lets you add information from the schools you’re considering to weight their immediate financial impact and, based on loan rates, their eventual cost down the road.