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Loan Basics for Students

Understanding Financial Aid Awards


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What do these words mean??


Financial aid award letters can be confusing. There's so much terminology to interpret and every award letter is different, this can make it hard to figure out what exactly you are being offered and how much exactly this will cost you and your family. Here's a breakdown of the terms:

Grants: This is money from the government that you do NOT have to pay back. Grants are typically need-based. Pell Grants are federal aid, Cal Grants are state aid.

Scholarships: This is money from some type of institution, whether it be a private donor or through your school. Scholarships can be need-, merit-, or interest-based. You do NOT have to pay this money back.

Loans: This is money you DO have to pay back.

Direct Subsidized Loans: Available to undergraduate students who demonstrate financial need. If you must take out loans, these are the best kind as they do not accrue interest while you are in school at least half-time.

Direct Unsubsidized Loans: Available to undergraduate and graduate students without consideration of financial need. You are responsible for paying the interest on these loans during all periods.

Direct PLUS Loans: Available to parents/guardians of a dependent undergraduate student (parent PLUS loan) or to graduate students (grad PLUS loan). This is a credit-based loan and the interest will be higher than the other two federal loan types. You may request a deferment of payments so that you won't have to pay until after your student graduates but interest will start accruing immediately after the loan is disbursed.

Private Student Loans: Private loans are made by private lenders such as a credit union or bank, not the federal government. They are credit-based and often require a co-signer. There is much more variability in this category of loans- some will allow you to defer payment until after graduation but some require you to start making payments while still in school. In general interest rates are higher than federal loans but this also varies.

Federal Work-Study: A program where you work, usually on campus, to earn your financial aid.

Cost of Attendance (COA): An estimate of what you'll pay for one year of school. Usually, this includes tuition and fees, room and board, books and supplies, transportation and living expenses. However, some schools use the term "direct cost" and this only refers to tuition and fees. This does not factor in the other expenses making it appear like you'll be paying less than you will in reality.

Expected Family Contribution (EFC): A number used to determine how much financial aid you are eligible for based on your family's income. It is not what your family will actually be paying, it is an estimate of what the government "thinks" your family can contribute.


financial aid breakdown of costs



How can I compare my award packages?


The Financial Aid Award Comparison Tool allows students to create a free account on and then compare up to six financial aid award packages from California colleges and universities using the information from their award letters. After entering all of their award information into the tool, students will be able to see the following:

  1. “The Gap”, or the remaining cost of college that still is not met through grants, scholarships or loans (a negative result actually means that the student has a surplus from the financial aid awarded).
  2. The percentage ratio of “free aid” vs. “loan aid” with explanations of what this ratio means and why this is important.
  3. Students can save their worksheets and also print them.
  4. They can link to a repayment calculator which will allow them to view their repayment options.

The tool can be accessed by:

  1. Go to California Colleges Website
  2. Log on to your account or create a free account if you do not already have one
  3. Click “Finance” (or click the link in the middle of the home page)
  4. Click “Compare Financial Aid Awards”
  5. Select the California college or university from the drop-down menu (the TCOA will auto-populate)
  6. Enter information from your award letter
  7. Scroll to the bottom of the page and click “Save Worksheets and Compare Awards”