Thoughts on Financial Aid Packages

I’ve been looking at financial aid packages with students, and I’m struck by the confusion caused by differences in the way colleges present their offers. Next year the U.S. Department of Education will require uniformity in formatting. This year, however, students and their parents have to make sense of the differences across offers on their own. I have some suggestions.

But first I have a complaint. Some colleges, here unnamed, use a dazzle-and-distract strategy to disguise a comparatively weak offer. They include some nugget that can thrill an 18-year-old who has no financial sophistication. Some parents are also financially unsophisticated, especially among low income and first generation college students. Right on the heels of an admission’s exhilaration comes the exhilaration of a financial aid award. The colleges are motivated to assure the student and his/her family that college is affordable. Okay, but at what cost to the student?

Earlier this week I went to Starbucks to review financial aid offers with an outstanding student. She received admission offers from a selective private college and several University of California campuses. She is from a low-income, first-generation family. I told the barista that my student is amazing, had been admitted to some highly competitive colleges, and that we were there to celebrate. The barista comped her green tea and brownie. The barista also had thoughts on whose offer the student should accept, and wrote “Bruins” on her cup. We sat down in a glow. 

No one can read the offers and immediately understand the differences. So we made a matrix. On the X-axis: a sampling of the schools. On the Y-axis: cost of attendance based on the financial aid packages offered.



  • Scholarships which will be renewed each year if the student maintains good grades

  • Freshman year scholarships which may or may not be renewed

  • Pell Grant, which is automatically awarded by the federal government, depending on budget availability

  • Cal Grant A, which is automatically awarded by the state of California, depending on budget availability

  • FSEOG Grant, which is funded by a block grant from the federal, depending on budget availability, and awarded at the discretion of the college’s financial aid office

We identified three issues with the grants:

  1. The renewable scholarship came with a fancy name, and came with a very impressive looking certificate. The girl’s family was mesmerized by this certificate, and had concluded that they could afford this college because of the high value scholarship. The certificate overly inflated the value of the scholarship. 

  2. She is vulnerable to state and federal budget cuts

  3. There are two scholarships in her package. One is automatically renewed if she meets the GPA requirement. The larger of the two is not automatically renewed. She may have to replace this scholarship with other funds beginning in her sophomore year.


Work Study

  • The differences between the work study grants surprised me. Our sampling offered $3,200, $2,200 and $1,200 in work study.

The student and her family read this as having a job while she is at college, comparable to babysitting her nieces and nephews during high school. It looks to the casual reader that some work study jobs simply pay more. Perhaps. I worked in a reference library during college, making less than classmates working in the kitchens. 

But let’s think about the work study grant in hours, not dollars. If she makes $10.00 an hour, attends school for nine months (three quarters) less two week breaks for Christmas and Spring Break, she will work between 3 to 9 hours a week. Essentially, she could work an afternoon each week, or a full day each week. 

This difference is not necessarily bad, but it will create different college experiences.



  • Perkins Loan, federally funded and awarded by colleges up to $5,500, for students with “exceptional need,” payments begin 9 months after a student leaves school, 5%

  • Stafford Unsubsidized Direct Loan, up to $5,500, non-need based, interest payments begin when loan is disbursed, 6.8%

  • Stafford Subsidized Direct Loan, up to $3,500, based on family income, interest deferred for 6 months after graduation, 3.4%

  • PLUS Loans, available to parents with good credit up to the amount of an education, 7.9%

All of my students aid packages included the the two Direct loans and a combination of university issued, Perkins and PLUS loans. This requires the family to combine the impact of payment schedules and interest rates. This requires the analysis of several separate payment schedules.

It is easy to assume that these loans are “free money” and the repayments are in the distant future. Another assumption is that the college degree will qualify the student for a job that can easily repay the loans. This is not always the case. In my student’s situation, to repay her loans at the private school, she will need a job at graduation paying $52,000. Few entry level jobs in her intended field, Urban Planning, pay that much money.

To understand the income necessity to service different levels of debt, I advise Debt Wizard.