Financial aid package example: Part 2

Dive into the numbers on a typical US college financial aid package. Then, go to https://www.khanacademy.org/college-admissions for Khan Academy's complete college admissions and financial aid resource!

- [ Voiceover] Why don't
we go ahead and take a look

at an example package, just to see

how all these numbers hang together.

- [Voiceover] Okay.

- [Voiceover] So why
don't you start me off

with the estimated cost of attendance.

- [Voiceover] So let's say
at the first institution

we're looking at, the total cost

of attendance is about 25,000 dollars,

so that might break out to tuition

of 11,000 dollars, room and board

or housing and food costs
of about 10,000 dollars,

an allowance for books,
2,000 dollars a year,

transportation, depending
on where you're coming from

of about 1,000 dollars a year,

and maybe some other expenses

that are unique to that institution

that would add up to the 25,000
dollar cost of attendance.

- [Voiceover] Great, and just to be clear

for the point you mentioned earlier,

you may see on a financial aid letter

just tuition, room, and board included.

- [Voiceover] That's right.

- [Voiceover] And if that's the case,

you want to actually add
in your own book allowance

transportation allowance, other allowance,

because those are
actually going to be costs

that you're going to incur,

and so you want to factor that in.

- [Voiceover] Exactly, the idea is that

with the cost of attendance,

you've got an understanding
of the total cost

of being at that institution,

and your exact cost might
be slightly different

than someone else.

- [Voiceover] Okay, so we've got our cost

of attendance here of 25,000,

you mentioned some different types

of scholarships, why don't
we put in some numbers here

from school, let's say 10,000.

What would be a reasonable amount

from a Pell grant?

Let's say if a family had an income

of around 50,000 dollars,

what would be a typical Pell
grant they might receive?

- [Voiceover] So a family
of that income level,

depending on what else is going on

with the family, family size,

how many family members in college,

let's say that they would qualify

for a thousand dollar Pell grant.

- [Voiceover] Okay, so
we have a thousand dollar

Pell grant, we'll go ahead and say there's

a 3,000 dollar grant from the state,

that this student has obtained,

and then why don't we also go ahead

and also put in 1,000
dollar outside scholarship.

This is a scholarship that is not coming

from the school itself, it probably won't

be included on the financial aid letter

unless you've already told them about it,

but it is something you
want to include here

because these are your own calculations

of what your costs are going to be.

And one sort of side note is

you do actually want to
let the school know about

those outside scholarships,

because it can have an
impact on your financial aid.

They want to understand your
true cost of attendance,

and if you've already
gotten that scholarship,

your cost of attendance is
going to be a little bit lower.

- [Voiceover] That's right.

- [Voiceover] So we put
in that thousand dollars,

that gives us a total scholarship amount

of, looks like 15,000.

So now, remind me again, how
do I get to the net cost here.

- [Voiceover] So the net cost is going

to be the difference
between the 25,000 dollars

of cost of attendance,
minus the 15,000 dollars

of scholarships or free money

that doesn't have to be paid back,

so what this institution's actually going

to cost you is 10,000 dollars.

- [Voiceover] Great, so 10,000
is what I'm responsible for

and that's not one time,
that's over a year.

- [Voiceover] That's
right, that's not saying

that you have to come up with that cash

all up front out of
your pocket right away.

There are options offered
to help you come up

with that 10,000 dollars, but that would

be the annual cost to you.

- [Voiceover] Okay, in this situation,

what would be sort of
reasonable work-study

and loan amounts that
a school could offer?

- [Voiceover] So let's
say a work study amount

of 2,500 dollars, which would allow you

to work less than 10
hours a week, I think,

is a really reasonable expectation,

and then a loan amount
of another 2,500 dollars.

So there's 5,000 dollars of that net cost

that's taken care of between
work-study and student loans.

So that leaves the family, or the parents,

with 5,000 dollars to cover

of that total educational
cost of 25,000 dollars.

- [Voiceover] And is that 5,000 going

to be due right away?

Day one of school, they pay the 5,000?

Or when do actually have to pay --

- [Voiceover] Typically,
no, it's usually paid

if it's a semester
school, it would be half

of it at the start of the year,

half of it halfway
through the academic year.

So it depends on that
school's academic calendar

and their billing cycle.

- [Voiceover] Great, and
the last question I have

for you, is 5,000
dollars for some families

that may be completely doable.

For others, that may be far above

what they can contribute.

- [Voiceover] The very first
thing I would recommend

to a family that's concerned about paying

the expected family contribution

that's showing up on their award letter,

is that they talk to the
financial aid office,

and make sure that the
financial aid office

has taken everything into
account that that family has,

the financial situation
that they're facing.

But after you've had that conversation,

if you're looking at a parent contribution

that you're going to need some help with,

then it's time to start
talking about additional loans.

- [Voiceover] Gotcha, and it looks like

in this situation, you might be able

to bump up the student's
work study a little bit,

or the student could take out
these low interest rate loans,

which might be better options

than the parent taking out loans.

- [Voiceover] As a first year student,

actually, from the Stafford loan program,

a student can borrow up to 5,500 dollars,

so that typically would be
the first thing we would

recommend to a student who is looking

for some additional help.

- [Voiceover] Great.
Is there anything else

that I should be looking
at when I'm understanding

the different components
of a financial aid package?

- [Voiceover] Well, I think it's critical

that you identify the
difference between scholarships

and loans, and work-study
that are being offered.

Unfortunately, it's not
always readily apparent

from the information that you're receiving

from the school, so
make sure you understand

what's a scholarship, what's
a loan that has to be repaid,

and what's work-study.

If you have any questions
about that at all,

go to the financial aid office to ask.

- [Voiceover] Okay, so
students really need

to kind of put this sheet
together for themselves,

it's not necessarily going to be handed

to them on a silver platter.

- [Voiceover] That's right, I think that's

the best thing to do to
make sure you understand

what's going on with your financial aid,

and how much are you signing for

in student loans, for example,

to really understand the bottom line

of what you're getting into.