As of October 29, 2011 all U.S. colleges and universities that enroll full-time, first-time degree seeking undergraduates and participate in Title IV federal student aid programs must have a net price calculator on their website to help clarify the actual out-of-pocket expenses a student can expect to pay to attend the school.
The net price calculator estimates the price of attending a particular college minus the average amount that students receive in grants or scholarships, which are both types of financial aid that do not have to be repaid. As reported by the National Center for Education Statistics, in order to be in compliance with the Higher Education Opportunity Act of 2008, the U.S Department of Education now requires colleges and universities to include the estimated price of attendance; estimated tuition and fees; estimated room and board; estimated books and supplies; estimated personal expenses, such as transportation; estimated total grant aid; estimated net price; percent of full-time, first time students that received grant aid; and caveats and disclaimers.
Published prices, or sticker prices, are the amounts for tuition, fees, room and board that colleges and universities post publicly, explains the College Board. Students pay the full sticker price to attend a particular school if they do not receive any type of financial aid, but many students receive tuition discounts from the school itself as well as gift aid, such as scholarships or grants from other sources, drastically lowering the amount that college really costs.
MSN Money’s Lynn O’Shaughnessy puts it best when she compares paying for college to shopping for a new car. Just as the sticker price isn’t what you’ll actually wind up paying for that car, most colleges will reduce prices in certain circumstances. In a bluntly-titled article Don’t pay sticker price for college, she reports that the typical private school lowers its tuition by roughly one-third while less-expensive public universities offer an average tuition break of almost 15 percent, according to the College Board.
Students from families with low incomes are often too discouraged by sticker prices to even bother applying at some costly colleges and universities, without realizing that the actual out-of-pocket cost is typically much lower. The new law hopes to change that habit. Inside Higher Ed explains that the goal of net price calculators is to give students and their families a better idea of how much they may pay out-of-pocket for a degree at that particular school.
The now-required college cost calculators take multiple factors into consideration, estimating how much college will actually cost. Colleges and universities can use the U.S. Department of Education’s free Net Price Calculator template, develop their own customized calculator that includes at a minimum the same elements as the department’s template, or opt for purchasing a third-party net price calculator, such as those offered by the College Board or Student Aid Services. The College Board boasts that hundreds of schools are using their tool while Student Aid Services claims that 575 college campuses have chosen their product.
These calculators sound incredibly helpful—in the past, students wouldn’t receive a financial aid award letter itemizing their estimated cost of attendance until the spring, making them wait until the last minute to figure out if they could afford to go to a particular college.
It’s disappointing, then, that AOL’s Daily Finance reports that a study conducted by Student Aid Services found that the results were wrong over half the time when the firm ran 145,000 real student profiles through the Department of Education’s free calculator.
It’s easy to think that the group simply wants to encourage colleges to purchase their tool instead, but other critics have found that the federal calculator’s “average grant” is calculated as the average among 2/3 of students receiving financial aid grants, as opposed to the average of all students. “The federal one wasn’t giving a real accurate picture of costs,” were the words of Rice University’s director of student financial services, Anne Walker. The Houston school also tried a Texas state template before opting to invest in a custom net price calculator.
“I think the calculators are helpful, but not especially important, because what you should be thinking about is how to get out of school with no leverage,” sums up Zac Bissonnette, author of Debt-Free U. The quirks with these calculators will hopefully be worked out once they are in effect and being used regularly.
It’s just important for students and parents to remember that the estimated cost is for one year of attendance—not four—and some colleges offer incoming freshmen more scholarships and tuition discounts than older students, resulting in higher costs during the subsequent years.
Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.
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