Financial aid award letters can be confusing. Every college creates its own financial aid letter format and no two are the same. However, here are three red flags you need to watch for when comparing your college options no matter what format a college uses.
Parent Plus Loans also known as a Direct Plus Loans allow a parent to borrow up to the cost of attendance, if approved for the loan, for a student's education. They are often the largest loan amount listed on an award letter.
Bottom line: Parent Plus Loans can substantially delay a parent's ability to retire and significantly increase their debt.
Non-renewable institutional scholarships or grants are monetary awards given to a student during their first year of attendance.
The awarded amount is only for the first year of attendance.
Bottom line: Students have to find a way to cover the original awarded amount for the remaining 3 years.
A financial aid gap is the difference between the cost of attendance and the money offered in the financial aid package.
The gap has to be paid in cash or by additional private loans.
Bottom line: Students or families have to come up with cash for the difference between what the college costs and the amount of the financial aid offered.
The inclusion of a Parent Plus Loan and/or a financial aid gap could be a sign that the college is too expensive. Before accepting a loan students/families should take into consideration that the year one loan amount will probably be needed for the remaining three years. Simply put, multiply all gaps and loans by 4 and remember that's still not including interest for the loans.
This article was originally published March 8th, 2021 on Hbcuinfominute.com