The Net Price Calculator: An Overlooked College Planning Tool
By Joe Messinger, CFP®
May 10, 2018
Can you imagine going to the grocery store and not being able to tell how much a gallon of milk will cost until after the cashier scans it and tells you the price?! Unfortunately, the cost of college is never really clear either. Students have to apply, be accepted, and wait for their financial aid letter before they know how much it will cost them. No one tool will give a family an exact cost, but net price calculators can be a help for getting a better idea.
What does “net price” mean?
The net price is the amount a student pays each year after subtracting scholarships and grant aid. Federal loans that have to be paid back are not included in the “net price” figure.
The “net cost” figure does include federal loans that have to paid back. This is affectionately called “self-help” aid. (We’ll come back to that later with an example.)
Knowing the net price allows families to start to compare colleges side-by-side. Families can use this price as a guide to develop a strong list of potential colleges that would be a good financial fit.
In the interest of transparency and to encourage students to attend college who might be thrown off by the sticker price, the federal government has required every college and university to have a net price calculator. This requirement was included in the 2008 reauthorization of the Higher Education Act of 1965.
The idea sounds great–a tool to show parents that a $50,000 list price college will actually cost them $30,000. However, the federal minimum calculator template does not provide enough detail to give an accurate estimate for most families. Plus, colleges are not required to adhere to a specific calculator formula. Luckily, many colleges have built upon the minimum calculator to create a more useful tool to incorporate things like household size, assets, or student merit in their factoring.
The most helpful calculators ask for financial information in addition to questions that would estimate merit aid, numbers like GPA and ACT/SAT scores. Students can fill out these calculators anonymously and see what students like them paid at that university.
Where, oh where has the calculator gone?
You would think a useful tool like this would be boldly featured on a college’s website. Unfortunately, you often have to do a bit of searching to find it. If the college has a search bar on their website, type “net price calculator” in the field to find it. Or simply Google “XYZ University net price calculator.” Another option is to visit collegecost.ed.gov or bigfuture.collegeboard.org/pay-for-college/tools-calculators and enter your college in their search bar to be taken to the correct page.
Pay attention to the fine print
Most calculators are intended for new undergraduates applying to be full time students for the first time. They also may use an average tuition number if different colleges/majors within the university have different price tags.
Make sure the calculator is using the most recent sticker price as the starting point, and remember this is probably last year’s price. The best a net price calculator can do is provide you with an estimate.
Watch out for net price vs. net cost
Although the government only requires “net price” to be provided, some colleges will show “net cost” as well. As we mentioned earlier, net cost will include available student loan figures in the final number. This result can be misleading. Only the net price includes aid you don’t have to pay back.
Let’s do one
How about The Ohio State University’s net price calculator? You’ll see on the very first page lots of disclaimers and details about what exactly you will learn with this calculator: “…an early estimate of: the expected cost to attend Ohio State, and how much financial aid your family might qualify for.”
Today’s current page notes that it is estimating the cost for 2018/19. The disclaimers point out that the results depend on the information you provide, it assesses merit and need-based aid (both federal and state of Ohio), it does not include current or transfer students, and not all scholarships will be included in the result.
Click “start” to fill it out.
Parents should note that colleges expect the student to fill this out. Although not exactly practical (your student might not know your federal tax numbers), it is a good task to do together. When they refer to “you,” they are referring to the student. (If you already know your Expected Family Contribution from completing your FAFSA, that will save you a lot of time!)
As you progress through the pages, you will indicate your intended campus, merit information, demographic information, dependent/independent status, and EFC. (If you don’t know your EFC, you will be asked financial questions in order to estimate this number.)
Finally, they are ready to present your net price. Note, they ask for name and email contact information. These items are optional. You do not need to provide them.
The results will provide direct (tuition and room/board) as well as indirect (books, fees, miscellaneous expenses) figures as well as any merit aid. (Our pretend student with the 29 ACT and the top 10% standing did not qualify for any. Competitive scholarships may be available–just not included here.)
These numbers are estimates. Ohio State provides the “self-help” or net cost numbers. The $5,500 available federal student loan “aid” will need to be paid back.
User beware, but use it anyway
Although you need to keep several details in mind, net price calculators can be a great starting point to begin to get a clearer picture of a college. Could that $40,000 sticker price actually be a better fit when your personal details are factored in? They are worth checking out.