Understanding Financial Aid Award Letters

Once you’ve been accepted to a college, you’ll receive a financial aid award letter that includes all of the sources for financial aid the school is offering you. It’s important to understand the different types of aid that are being offered.


A loan is money you borrow and must pay back with interest. Student loans can come from the federal government or from private sources such as a bank or financial institution. Federal student loans usually offer borrowers lower interest rates and have more flexible repayment options than loans from banks or other private sources.

There are three types of Federal Student Loans available:

Subsidized Loans: Loans made to eligible students who have demonstrated need. There are no interest charges until the student leaves school.

Unsubsidized Loans: The student does not have to demonstrate financial need to be eligible for the loan. Interest is charged from the time the loan is disbursed until it is completely paid off.

PLUS Loans: PLUS is an acronym for Parent Loans for Undergraduate Students. Loans are made to parents to help pay for education expenses not covered by other financial aid. PLUS Loans feature neither a grace period during which there are no payments due nor any period during which interest doesn’t accrue.


Grants are referred to as “free money” because they do not have to be repaid. For that reason, they are the most desirable types of funding you can receive to pay for your college education.


Federal Work-Study is a need-based financial aid program that allows you to work part-time to help pay for college. To be considered for Federal Work-Study, be sure to indicate that you’re interested in this program on your FAFSA. If you are eligible, your college will list the amount you can earn on your financial aid award letter.


Merit awards are typically grants, scholarships or tuition discounts that don’t need to be repaid, unlike student loans. Merit awards are generally renewable for four years if academic requirements are met.

Be sure you understand what is being offered, and don’t hesitate to contact the college’s financial aid office with any questions.