How to select your top aid package

If a university employee can't figure out which financial aid package is the best for her child, what chance does the Average Joe have when faced with a similar choice?

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It's not as easy as you may think: You're usually comparing apples to oranges to grapes to watermelons.

Joe Paul Case, director of financial aid at Amherst College in Massachusetts, remembers well the day several years ago a colleague called on him for help. "She said, 'I have four award letters for my son from four different institutions in New England, and I can't figure out what's the best offer,'" says Case.

One problem: The letters didn't follow a full-disclosure model, so the true cost of attendance wasn't clear. Case drew a grid and, piece by piece, they researched the costs beyond the obvious tuition, fees and room and board. That completed chart provided an apples-to-apples aid comparison.

"You want to compare the real price, not the sticker price," says Mark Rothbaum, president of Lunch-Money.com. As with any consumer purchase, the exercise requires both research and taking personal circumstances into account. Bankrate offers a financial aid calculator to determine eligibility.

For instance, the location of one school could mean much higher transportation costs -- and that's even if your freshman doesn't get homesick and want to jump on the first train, plane or bus out of there each Friday.

While deciding which school offers the best aid package is a whole lot more difficult than shopping around for the best bus fare home, knowledge of the process is power. Here's what you need to know:

Aid jargon
First things first. Being an aid-letter lingo pro isn't just about knowing the difference between your grants and scholarships (free money) and your loans (incurred debt).

Take the federal Stafford loan. With subsidized Stafford loans, the government pays interest while students are still in college (or later during deferment and grace periods). Unsubsidized Stafford loans, meanwhile, require that borrowers pay interest while attending college or add accrued interest to the principal loan amount when repayment begins.

Knowing who gets the money from each aid component also matters. Work-study awards are a classic example. Since the student works to earn this award over time, the funds aren't credited directly to his college account and could wind up in the local pizza delivery guy's pocket.

Expected Family Contribution, or EFC, is an especially important term to understand since that's what a family is asked to put toward the student's college costs. When there are shortfalls elsewhere in reaching a school's total cost of attendance, it's the EFC that grows. And while one might assume the EFC calculation is a standard one, schools can use different formulas.

If every financial aid award package featured the same format and terms, side-by-side comparisons would be relatively easy. But they don't, and they're not.

A few years back, Case served on a National Association of Student Financial Aid Administrators committee that created a recommended pattern for an award letter based on the full-disclosure model used by Amherst and other schools. Now, aid administrators can plug their letter's components into an evaluator tool to see how it stacks up against that model. But it's all voluntary, Case says, noting that even if everyone wanted to adopt the model, existing computer systems might keep them from the change anyhow.

Out-of-pocket costs
Beyond the billed amount, what will your family need to finance? From books and travel to personal expenses, you should make sure to include everything in your comparison.