Net Price Calculators

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The current process of applying for college admission and financial aid is backward. Prospective students must apply for admission before they know how much the colleges they are considering will really cost, after financial aid is taken into account. There is no up-front pricing.

This makes it more difficult for families to make an informed decision about college costs in the initial selection of colleges under consideration. A student might fall in love with a particular college and apply for admission, only to discover later that the dream college is an unaffordable nightmare. On the other hand, some families may exclude some colleges based on the sticker price, when generous grants might have discounted the sticker price down to a more affordable level.

To help address this problem, Congress requires every college to provide a net price calculator on the college’s web site, updated annually since October 29, 2011. The net price calculator provides a student (and his or her parents) with a personalized estimate of the one-year net price of the college for the student.

The net price is the bottom-line cost of the college after subtracting gift aid from total college costs. Gift aid is money that does not need to be repaid, such as grants and scholarships. Total college costs include not just tuition and fees, but also room, board, books, supplies, equipment, transportation and miscellaneous/personal expenses. The net price is a discounted sticker price, the amount of money the family will have to pay from savings, income and loans to cover college costs.

Net price calculators help push conversations about college affordability earlier in the college admissions process. Families can use a college’s net price calculator to play what-if scenarios and explore the impact of financial decisions on the net price. The net price calculators help families identify colleges that they might not otherwise have considered due to the sticker price. Students and parents are becoming increasingly sensitive to the financial and non-financial return on a college investment.

Flaws with Net Price Calculators

Unfortunately, net price calculators suffer from several flaws that make it difficult to compare net price estimates from one college to the next. The accuracy of net price calculators can vary considerably. Some calculators use up-to-date cost and financial information, while other calculators use two-year old data. Some calculators provide a basic estimate, while other calculators ask more specific questions to provide more precise estimates. There may be thousands of dollars difference between the net price calculator’s estimate of the net price, the net price based on the financial aid award letter received after the student is admitted and the actual college bills are received from the school.

Effectively, net price calculators provide ballpark estimates of whether a college is affordable, but they don’t distinguish between home plate and center field. Differences of a few thousand dollars between the net price estimates of different colleges are not necessarily significant. Families should not eliminate a college from consideration solely because of a high net price estimate, because the net price estimates are not necessarily accurate enough to be reliable. But, the family might wish to add other colleges based on the colleges having lower net price estimates.

There are also other problems with net price calculators. It may be hard to find a college’s net price calculator on its web site. The calculator might be located on the front door of the college’s web site or on the admissions or financial aid web page. If a link to the net price calculator is not prominent, try using the web site’s search feature and search for “net price calculator” or “financial aid calculator.” The net price calculator reports an average net price for just the students who receive grants. It may understate the net price for students who don’t qualify for grants. The net price is also only for first-time, full-time students, and so doesn’t necessarily yield an accurate result for part-time and transfer students. The net price is just for one year, and may underestimate the net price during the sophomore, junior and senior years, since about half of all colleges practice front-loading of grants, where freshmen get more grants than upperclassmen.

Related Resources

In addition to using a college’s net price calculator, families may find it helpful to look at the net price statistics available on the U.S. Department of Education’s CollegeNavigator.gov. The College Navigator web site provides information about college costs, financial aid and net price for all colleges. It uses the same methodology for calculating each college’s net price, yielding comparable figures. The web site shows how the college’s average net price has changed over a three-year period. It also shows the average net price for five typical family income ranges.

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