By Admissions Narrative · · MIT Alumni Admissions Interviewer
Key Takeaways
Award letters often bundle grants, loans, and work-study together — always separate them
Free money = grants and scholarships (don't need to be repaid)
Borrowed money = loans (must be repaid with interest — these are NOT aid)
Earned money = work-study (must be worked for — not deposited automatically)
True net cost = total cost of attendance minus grants and scholarships only
College financial aid award letters often present a confusing mix of grants, loans, and work-study as if they were equivalent. They are not. Grants and scholarships are free money. Loans must be repaid with interest — they are debt, not aid. Work-study must be earned by working. Your true net cost is total cost of attendance minus grants and scholarships only. Calculate this number for every school before making enrollment decisions.
Financial aid award letters are frequently confusing — and occasionally misleading in how they present information. Here is how to decode them accurately.
The Components of an Award Letter
Grants and scholarships (free money): Federal Pell Grant, institutional grants, state grants, merit scholarships. This money does not need to be repaid. Subtract the full amount from your cost of attendance. Work-study (earned money): A work-study award is not money deposited in your account. You must find a qualifying job on campus or at a nonprofit and work to earn it — typically at $10–$15/hour. Many students earn less than their full work-study allocation. Loans (borrowed money): Federal Direct Subsidized Loans, Unsubsidized Loans, and Parent PLUS Loans must all be repaid with interest. They are debt — not aid. A school that presents loans as part of your 'financial aid package' is technically accurate but practically misleading.
The Net Cost Calculation
Net Cost = Total Cost of Attendance − (Grants + Scholarships only)
This is your actual out-of-pocket obligation before additional borrowing. A school offering $30,000 in grants on an $60,000 cost of attendance has a $30,000 net cost — regardless of whether they also offer $10,000 in loans.
Multi-Year Analysis
Check whether grants and merit scholarships renew automatically, what GPA is required to maintain them, and whether amounts are typically stable across all four years. First-year packages sometimes are more generous than subsequent years.
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Student loans appear in financial aid packages but are not 'free' aid — they are debt that must be repaid with interest. When comparing schools, calculate net cost by subtracting only grants and scholarships from total cost of attendance. Never count loans as reducing your cost.
Sources & References
NASFAA financial aid award letter guide
Consumer Financial Protection Bureau financial aid comparison guidance
College Board BigFuture financial aid comparison tool