by Todd Fothergill and Tom McGrath

Wouldn’t it be great if you were able to go to a college or university website, enter your financial data into a secure calculator and get the real annual cost to you if your son or daughter were admitted to that school?

The new Net Price Calculators (NPC) are supposed to provide that option.

October 29th was the date when all colleges in the United States were required to post calculators on their web sites that provide this type of cost transparency to prospective applicants and their families.

The jury is out on just how effective and accurate these calculators will be, and our research to date justifies those who have expressed serious doubts about this initiative.

Higher Education Act 2008 – Feds To The Rescue?

  • The objective is valid. The current outcome is lacking.
  • The goal of the NPC provision was to help families determine how much they will really have to pay.
  • Under the new system, prospective applicants will now be able to enter financial (and in some cases, academic) data into the NPC on a college website.
  • The intent was to provide a method for consumers to get a cost estimate from a college before an application for admission was made.
  • The U.S. Department of Education developed a basic NPC template. Other companies also offer NPCs that add more flexibility for the colleges.
  • Consequently, consumers are going to find a lack of uniformity among the NPCs they encounter and this will indeed create confusion.

Observations From Our Research Of Over 80 NPCs

  • Many families will not know whether or not a college employs tuition revenue management or “financial aid leveraging” wherein students at the top of the admit pool (academically) receive preferential aid packages in order to influence enrollment decisions.
  • There are close to 1,000 colleges that employ some form of this practice. No single net price calculation will flag them.
  • Even if you know the college’s policy, you will not know where you stand until you get your award letter.
  • We conducted almost 200 calculations using a variety of different NPCs and found only two that truly incorporate the student’s academic record.
  • It was very concerning to us that each of the calculators we used collected different family data. Plus, there is no uniform way that colleges are required to display NPC results.
  • Colleges are permitted to use customized approaches, but without a uniform method, real comparisons among colleges are difficult to make.
  • Finally, there will be serious confusion for divorced and/or separated parents. Some colleges will require financial data from both biological parents to ultimately determine a financial aid package, but we have not yet seen an NPC that can “run the numbers” for these situations.

Like MSRP, Net Cost Is Only Part Of The Story

The uncertainty with regard to your standing in the pool of admitted students extends to awards made to meet financial need as well as merit scholarships. While average merit awards are embedded in the college’s average grant aid figure, this is only marginally informative or helpful for any individual applicant.

Merit scholarships may or may not be part of college’s aid package (a policy issue) and for some colleges any amount assumed is pure speculation. The NPC’s we researched often include a disclaimer in this regard and note that it will be subject to the judgment of Financial Aid Office or scholarship committee. That’s comforting.

Our research of 80 institutions indicated that net price varied by more than $10,000 for the same college depending on the EFC (Expected Family Contribution). We also found that variations among colleges for the same EFC can also be in the tens of thousands of dollars.

So you must enter data into the NPC for each school under consideration using the instructions provided on the respective websites. And, you should run the NPC in subsequent years too. This will account for changes in TCOA (Total Cost Of Attendance), EFC formulae, family finances and other important data.

Families should also be aware that timing is a key issue. Colleges may change their financial aid packages in the spring depending on the applicant pool and the enrollment targets they need in order to achieve net revenue goals. The aid estimate generated by completing an NPC in the high school senior year may differ from the aid awarded in the spring even with no change in financial data.

We advise you to print the NPC results from each college website in order to compare the results to the award you actually get. This will provide some potential leverage at decision time.

Establish Your Financial Comfort Zone

With all of these conditions in mind, when assessing one or comparing a list of candidate colleges it is up to each family to conduct an “affordability review” that determines precisely what you can comfortably handle for a net cost. Remember, true net cost is TCOA minus grants and scholarships (money you do not need to repay).

For more information, visit College Search GamePLAN.

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