The most critical tip for reading college financial aid offers

We try to make enrolling at Central Michigan University simple. But every year, students and parents receive financial aid offers from schools across the country and find out that every school operates a little differently, leading to the question “How do I begin to compare these schools?”

One of the things I regularly tell my staff is “make sure our prospective students know the same information you would want your family members to know,” and that’s why I’m sharing with you the most critical tip for reading your financial aid offer. I hope we can help alleviate some stress around this topic. With a child going through this process right now, I know how hard it is to navigate everything that goes into a college decision. 

Without further ado, the most critical tip for reading your financial aid offer is:

Understand what “Cost of Attendance” means at each school

Cost of attendance appears on every school’s financial aid offer, so how hard could it be? Pretty hard, actually.

In its most basic form, the cost of attendance is an estimate of what it will cost your student to go to school for a year. However, with every school using a different calculation for tuition, housing, books, transportation, and other expenses, accurately comparing the costs of your top schools requires some research. 

At CMU, you will see cost of attendance listed like this:

Meanwhile, another school you’re exploring might list cost of attendance this way:

At first glance, it appears that the second school costs less and has a simpler cost structure. After all, $28,000 (or $29,200 if you add in the “Other costs”) is less than the total listed by CMU. Not so fast.

There are three important things to understand before accepting that cost at face value. 

1. Cost of attendance is not a bill

As strange as it sounds, it’s important to know that cost of attendance does not specifically indicate what your costs will be. It’s more likely to be an average of expenses students incur. Think of it more as an estimated financial aid budget than a true cost.  

The critical costs to pay attention to when comparing institutions are those related to tuition, fees, and housing and food (also known as room and board or living expenses). These are the direct costs–those billed by the university. When looking at the example above, you can see that the cost of attendance appears higher at CMU but the expenses the university will charge you–the direct costs–are slightly lower ($27,040 vs $28,000)

2. Cost of attendance is calculated differently at each school

Now that you’re focused on direct costs, it’s important to know that each school has its own method of determining these figures. The federal government has set some new standards for this, but they will not go into effect until later this year. With that said, you do have some control over these direct costs. We’ll get to the indirect costs next–they deserve their own section!

Let’s look at tuition for example. CMU charges per credit hour, so your cost rises and falls with each course your student takes. Other schools charge a flat amount for a certain number of credits and then charge per credit if a student takes more or less than that amount. Additionally, CMU has a higher tuition rate for upper-level courses. Other schools charge different tuition rates based on the academic program but may list only their lowest tuition rate on their aid offers (buyer beware!).

The same goes for housing and food (often called room and board). CMU has four different housing rates and four different meal plans. While doing research for my daughter, I found that the cost listed for housing and food at her school was neither the housing nor the food cost that we could expect to see on our bill.  

CMU defines each of the amounts as follows: 

And that, as I promised, brings us to indirect costs. 

3. Cost of attendance determines your level of financial aid

Here’s some inside information. An institution’s cost of attendance is used, in combination with your Estimated Family Contribution, to determine the maximum amount of aid your student can receive.

How does that relate to indirect costs?

We could list lower numbers to make our annual sticker price appear smaller, but instead, we use the average cost of indirect expenses from students across the country. This makes you potentially eligible for more financial aid.  

For example, students who travel to CMU from long distances benefit from financial aid that can help offset their costs of transportation and other expenses. Students who decide not to travel to and from campus as often will naturally spend less than those who return home regularly.  

The same goes for a student’s choice of entertainment and how they purchase their books. 

That’s the way most indirect costs work. We list the average amount spent by students across the country, but you ultimately decide those costs. They do not appear on the bill from the university. 

The bottom line?

Use cost of attendance to guide your budget

To accurately compare each school you’re considering, find out how the direct costs are calculated and how they will change based on your specific situation. Then, estimate your own indirect costs. You know your situation best.