Thursday, April 2, 2009

College-Bound Students and Parents: Time to Study Financial Aid Award Letters

(BUSINESS WIRE)--Beginning today, students who have been accepted to college and have applied for financial assistance will receive offers of aid, commonly known as financial aid award letters. Once they do, it is time to compare which award package will go farthest in the current economy.

Financial aid award letters are sent out by colleges and universities to let students accepted for admission know what types of financial assistance they are eligible to receive, in what amounts and under what terms. The financial aid options outlined may include grants, scholarships, work-study and student loans. The aid awarded depends on the institution’s cost of attendance, the availability of funds and the family financial information provided on the federal financial aid application known as the FAFSA (Federal Application for Federal Student Aid).

Many families overlook the cost of college as they select their institution, according to a national study of 1,400 undergraduate students and parents from Sallie Mae and Gallup. Four out of 10 families last academic year did not limit their search based on cost—even after reviewing financial aid packages, said the study, “How America Pays for College.”

Sallie Mae advises students and families to read the fine print in each financial aid award letter and to accept or decline the offer in advance of each school’s deadline. Sallie Mae’s free Education Investment Planner helps families compare financial aid award packages and see what portion of the school’s cost the aid offer covers. If families determine that they will need student loans to meet the cost of college, they may use the Planner to estimate monthly loan payments and to determine whether those payments would be manageable at different starting salary levels. It is free, easy to use and available to anyone online at www.SallieMae.com/plan.

As families assess financial aid offers and make their college selections, Sallie Mae encourage them to follow its “1-2-3 approach” to paying for college:

1. Find “free money” first, like grants and scholarships. Consider supplementing with current income and money saved through a tax-advantaged 529 savings plan (such as www.Upromise.com) and explore interest-free tuition payment plans (such as www.TuitionPay.com).
2. Maximize federal student loans. Consider borrowing under the federally subsidized student loan programs, which provide consumer-friendly loan rates, benefits and repayment options for students and parents. Parents and graduate/professional students can borrow up to the cost of attendance under the Parent PLUS and Graduate PLUS programs, respectively.
3. Use private student loans to fill any remaining funding gap. Applying with a creditworthy cosigner may help students qualify for approval and a better interest rate.

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