Net Price Calculators: New Tools for College Cost Research

As of October 29, 2011, colleges that administer federal financial aid – including federal student loans, federal grants, or federal work-study assistance – must include tools, known as net price calculators (NPCs), on their school websites.  The rule is part of a federal mandate, outlined in the Higher Education Opportunity Act (HEOA) of 2008.  Thanks to the net price calculators, current and prospective students can obtain better estimates of how much they’ll be expected to pay for tuition.  The calculators don’t guarantee any type of aid – whether it may come from the college, the state, or the federal government – but they do outline potential options.

Even though many college websites were already posting uniform “sticker prices” for tuition costs per credit, up until recently, individual students couldn’t gauge their personal cost of attendance.  From one student to the next, college tuition at the same school can be very different – based on the student’s family income and savings; his status as a dependent or independent student, possibly with dependents of his own; his military involvement; and other factors.  Net price calculators weigh all these variables, while helping to show students that even high-priced colleges may still be within reach.

How Net Price Calculators Work

First you answer a series of questions about yourself and your family.  (Net price calculators do not require any identifying information, like last names, addresses, or social security numbers.  They can be used with full anonymity.)  The calculator then provides you with your estimated cost of attendance at the selected college, based on your financial situation, and on the average aid awarded to similar students at that same college, during previous years.  “The net price calculator at most institutions is primarily an incoming, full-time student product,” explains Bob Andersen, director of financial aid at Western Illinois University.

But not all schools use the same formulas within their net price calculators.  According to Andersen, the results produced by different calculators range from a “best guess” to a “pretty accurate estimate.” Varying accuracy is owed to the effectiveness of the calculator in measuring two key areas: your expected family contribution (EFC) and available aid packages; the first measurement often impacts the second.

How Net Price Calculators Differ

The federal government developed a standard calculator to meet the HEOA’s minimum requirements.  Colleges have the option of using this federal version or creating their own, customized versions.  In Andersen’s view, the federal model is actually the most error prone because it relies on two-year-old table data from the Integrated Postsecondary Education Data System (IPEDS), and because it uses broad ranges of income to determine the average EFC within a given bracket.

“The next tier of calculators estimate EFC based on a limited set of questions that fit the majority of new applicants, but do not do a good job with special categories of students, such as ‘zero EFC’ students and nontraditional students,” says Andersen.  As noted above, NPCs are designed for so-called “first-time, full-time” students.  Nontraditional students, who may be studying part-time, or who may have already earned a handful of college credits, won’t necessarily see accurate results from an NPC query because some forms of financial aid are contingent on enrollment status and degree progress.

Lastly, Andersen outlines a third tier of calculators, which factor variables and produce results that are very close to actual EFCs – the official figures that can only be determined after students complete a Free Application for Federal Student Aid (FAFSA).  At his own institution, Andersen reports, “most EFCs are calculated within $100, and we’re rarely off by more than $500.”  Some universities also build “packaging formulas” into their high-end NPCs, so the aid results listed are even more personalized, and not table-driven. “The problem, as you might expect, is that you can’t tell if the calculator you are using is a rough estimator or a precise estimator.”

Areas Where Net Price Calculators May Fall Short

Overall, the calculators are being applauded by advocates for transparency in college costs, but clearly they are far from perfect.  Besides the quality differential, NPC results often don’t distinguish between different types of financial aid, like merit-based aid versus need-based aid.  For example, if you earned great grades in high school or you scored high on your SAT/ACT exams, you might be eligible for aid that doesn’t hinge on your financial need.  But since NPCs aren’t designed to weigh your academic accomplishments (or lack thereof), you may be seeing aid estimates that are too high or too low.

Some NPCs are also faulted for using the previous year’s tuition and fee information, instead of projected rates.  Experts further question whether students will remember to multiply the net cost by two or four – or even five – depending on how many academic years they may actually be enrolled in college.  Finally, there’s always the potential for user error; net price estimates are only as accurate as the personal data users input.  “As long as students and parents understand that the calculator is a rough estimate, I believe [NPCs] are a help in planning,” sums Andersen.

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