Learn common terms, such as gift aid and net costs, which are used in financial aid award letters.

For many families with a college-bound student, the financial aid award letter is just as important as the acceptance offer. But these letters often contain specific key terms and acronyms that families find confusing. To help prospective students and their families navigate their financial aid award letter, here are a few common words that are used in these letters.

1. Cost of attendance, or COA: This figure includes the amount that the school charges in tuition and fees as well as estimated school-related expenses, such as room and board, food, transportation and supplies, to name just a few. “You want to understand from that figure what are your direct costs and what are your billable costs. The other stuff is just an estimate, and you may spend a lot more than that, or you may spend a lot less than that, depending on living expenses,” says Brad Barnett, senior associate director of financial aid and scholarships at James Madison University in Virginia.

2. “Gift” aid: This is money the student doesn’t need to repay. Grants are usually offered by the college as need-based aid and scholarships are often merit-based. [Learn the definitions of 12 college financial aid terms.] “I prefer scholarships because those are most likely to be renewed each year based on easy renewable requirements such as GPA or having full-time student status,” says Blaine Blontz, a financial consultant at Financial Aid Coach who advises parents and students on how to maximize financial aid awards. Blontz also says grants are less predictable and tend to fluctuate year-to-year based on a family’s financial need.

3. Net costs, sometimes referred to as net price: This is the difference found by subtracting grants and scholarships from the total cost of attendance. [See how to map out your financial aid award letter.] Financial aid experts say this figure helps families see how much they’ll probably borrow in student loans to meet costs, whether it’s with federal Direct loans, which are in the student’s name, or with parent PLUS loans.

4. Estimated family contribution, or EFC: Many schools calculate a family’s ability to contribute based on the information provided on submitted financial aid forms, such as the Free Application for Federal Student Aid, commonly known as the FAFSA. “That EFC number is an estimate as to what the government thinks the student and his or her family can pay for the education. That number is a benchmark for the schools to use to figure out how much need-based aid that student needs to go to a school,” says Barnett from JMU.

Most schools determine need-based aid by subtracting EFC from the cost of attendance. Experts says each school has its own way of generating this figure. “It’s important to know that there can be a range of EFCs at different schools, it depends on how the school calculates things,” Blontz says.