Source: flickr user the-open-university.

Source: flickr user the-open-university.

In the next few weeks, financial aid packages for college-bound high school seniors will begin to roll through the door. Interpreting and comparing them is one of life’s bigger challenges in part because financial aid has its own language, in part because each school might do things just a little differently, and in part because the nuances of each individual financial aid funding source has its own set of rules and regulations.

If you look at the aid package long enough and read all of the fine print, you should come reasonably close to understanding it; however, there is one aid program in particular that seems to generate a disproportionate amount of confusion: Federal Work Study (FWS).

Work Study…sounds simple enough…it’s a job…you work and then you get paid…sounds fairly straight forward, right?  It is, until you learn how Federal Work Study needs to be handled by the financial aid office.

Because FWS is a federal program that is awarded based on the student’s financial need, the Financial Aid Office at the college is responsible for determining whether or not you qualify and they indicate so in your financial aid package.  The amount they list on your aid package is simply an estimate of what you might earn. You get nothing unless you actually work hours at which point you get a paycheck for the hours worked.

Because you don’t get any money until you work, you cannot actually deduct the FWS amount on your financial aid package from your tuition, room and board charges at the school.

Here is an example:

University A costs $40,000 for tuition, fees, room and board.

Your financial aid package from University A is:

University grant $20,000
Subsidized Direct student loan $3,500
Federal Work Study $2,000
Total aid $25,500

You may think that you could simply deduct your total aid amount from the full cost of attendance to calculator your remaining balance, but you’d be wrong.

You cannot deduct the federal work study from your charges. You’ll earn a direct paycheck from your work study job. It will NOT appear as a credit on your student account.

What you owe University A would be:

Total costs $40,000
Eligible financial aid $23,500
What you would owe $16,500

That means that even if you will earn $2,000 in work study, you’ll still need to first come up with that money (either in cash or loans) to pay your bill.

Too often, students don’t understand the way that work study is factored into the college cost equation, and they’re either left with unexpected college expenses or more student loan debt than they expected to take on.

Work study can be a great program and the money earned from a work study position can help to offset some of the costs of college, but it’s important to understand how that money works and how it’s calculated in your financial aid award letter.