Every year, colleges from across the country send a financial estimate to prospective students, giving them an idea of what it would cost to attend the school. Colleges and universities are permitted to take certain liberties to showcase the lowest possible out-of-pocket cost, such as packaging more student loans than the person in question may be eligible for and awarding federal work study to students when placement is not guaranteed.

Financial estimates should aim to be as transparent as possible. Some of the most helpful letters will be structured off a federally recommended template and include the low end of federal aid students may receive to best reflect the actual cost minus the financial aid a student can realistically expect. In this case the remaining estimated balance calculation could be used to compare costs among multiple institutions. To learn more, keep reading for a breakdown of the components of a financial estimate letter.

Next is the estimated federal financial aid section of your letter. Most US citizens who file taxes and have a social security number are eligible to receive some form of this aid. The amount of aid granted is determined by the Free Application of Federal Student Aid (FAFSA). While some aid, such as the Pell Grant, is based on financial need, most students can receive loans regardless of which college they attend. The allocation of the Federal Direct Loan, for example, varies from student to student.

Some letters may estimate certain types of aid, such as the Pell Grant and PLUS Loans, based on national averages and automatically apply these benefits, even if you aren’t eligible to receive them. Be on the lookout for federal work study in your letter, as students are typically not guaranteed to secure campus employment. Students should also be aware of student loan awards that have the net effect of making the estimated remaining balance zero dollars. High student loan dollars in this area may create a situation where a student is over-borrowing in the long term.

The first section of a financial estimate letter is typically a total cost estimation, including tuition, meal plans and housing for students who intend to live on campus. The national averages for room and board packages ranges from $8,660 to $11,760 or more depending on the college in question. When comparing these costs across universities, make sure to take into account the rules of the scholarship program before eliminating housing and meal plan costs, as some scholarships may require students to live on campus. Some schools also require freshman to live on campus, a fact which may not be disclosed in their financial estimate.

Other costs include course material fees, which can vary based on the specific classes a student enrolls in. They typically cover textbooks, housing application fees and activity and health fees. Also keep an eye out for any program premiums, which students may not be made aware of until they get their first bill.

This section should be standard on every financial estimate letter, as it provides the remaining cost after scholarships and federal aid. But remember that just because the balance may read zero, doesn’t mean you won’t owe anything. As pointed out previously, information within the federal aid and student loan sections likely include forms of aid that must be paid back. For more information about reading your financial estimate letter and to prevent over borrowing, check out these videos:

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At Grand Canyon University, our transparent financial estimate letter is designed to provide prospective students with the most accurate information. Academic awards for direct students lock in during the sixth semester of high school and can only increase if your grades or test scores improve by the time you graduate. Our admissions representatives are trained to help you calculate the net cost for each school you may be considering and identify additional funding options where needed. If you have any questions about the cost of attending GCU or would like personal guidance in calculating the true cost of attending any university, contact your admissions representative today and get started on your journey to find your purpose.

The next section of a financial estimate letter will list scholarship aid you may be eligible for. Most universities do not automatically renew scholarships awarded to incoming freshman. Be cautious of the number and renewability of awards when calculating the total cost of attending any specific college. Some schools may also reduce or rescind academic merit awards based on graduated high school transcripts.

Keep in mind that unless a student provides the college with information on outside scholarships, the financial estimate letter will only initially include funds that the institution is aware of and responsible for distribution to the student. The cost to attend less the scholarship aid awarded equates to the net cost of attendance. This net cost does not include any federal aid, which encompasses loans, grants and work study so is the most accurate figure to reference when comparing net costs between multiple institutions.