When you think about attending college, you probably have put a little thought into what it might cost. Still, you might have some standard questions like: Will I pay the tuition rate listed on the school’s website? Will I qualify for a Pell Grant? What scholarships am I eligible for at this particular school? Will I need a private loan to cover any additional costs? And so on…
As it turns out, calculating the cost of attending school isn’t as straight forward as you would imagine! Often times the price you see on a university’s website, or “sticker price,” isn’t what you would actually pay. Fortunately, we are here to provide information and tools for your financial planning success.
Calculating Costs of College
For those doing research, you may have just now stumbled across net price calculators. If so, you are way ahead of the curve — not a lot of individuals are aware of these tools. Still, a common question from students and parents at this point usually is, “How accurate are net price calculators?” In other words, can an online calculator really help predict a true cost for my personal situation? After all, it’s very important for parents and students to be able to set realistic expectations about financial aid options and loans.
Fortunately, in 2011 in accordance with the Higher Education Act, it became mandatory for all colleges and universities to provide a Net Price Calculator (NPC) on their school’s website for parents and students to use to predict how much scholarship and other financial aid a college would most likely offer a student. The NPC is a powerful tool understand and properly evaluate a financial aid package.
How Net Price Calculators Work
Each college is required to provide prospective students with a net price calculator. This tool is specific to each individual college. There isn’t one NPC that works for all colleges, unfortunately. From my experience, a lot of colleges don’t make this tool easily identifiable on their websites. The best way to find their NPC is to go to Google and type in the school’s name and “net price calculator” behind it before you search.
Once you locate the tool, the NPC will gather information specific to your circumstances, such as: GPA, ACT/SAT scores, parents’ income and assets, number of kids enrolled in college, alumni status, leadership and activities. Some NPCs are more comprehensive than others and take longer to complete. Others are short and don’t take into consideration much beyond grades and test scores. For what it is worth, the more questions and comprehensive the calculator, the more accuracy it typically holds.
Regardless of the complexity of the NPC, the calculator will provide a sample financial aid package to the family that will include cost of attendance, room and board, books and supplies as well as scholarships, work study, and estimated loans. The estimate will also include a final dollar amount that parents will need to pay. When studying the estimate, parents need to read carefully to be sure they understand how much of the financial aid package will be student loans versus parent loans.
In summary, the goal of the calculator is to create a unique cost based on your specifics. In theory, it will provide the amount of gift aid that you might be eligible from federal and state grants as well as institutional aid from the school itself. The calculator provides a net cost of attendance — what you will need to pay — after grants and scholarships are applied.
How Accurate Are Net Price Calculators?
It is worth stating this boldly: net price calculators are simply estimates. Take each calculation with a grain of salt. It is a good starting point to use a NPC, but it is not a firm offer from the school. Again, you can now use results from the calculator to verify with the school and seek further guidance.
Planning for Financial Success
Students and parents should run NPC on EVERY school a student is considering well before the applications are sent. If a net price comes back extremely high or with a significant amount of student loans, parents and students should seriously consider whether or not attending that school would be worth the investment. Most importantly, by using the NPC in advance, parents and students now have the tools and knowledge to make thoughtful decisions. It is no longer wishful thinking or a guessing game as to how much scholarship money a student will most likely receive. Both parents and students win when they know the reality of college cost and likely scholarship awards.
Dreams of prestigious (and expensive) colleges fill the hearts and minds of many parents and students today. For students who work tirelessly day and night to maintain a 4.0 — participate in activities all year round — acceptance to a prestigious college is the prize they have been chasing. But for too many students, that prize comes with a high-price tag– one that doesn’t magically go away by simply wishing for scholarship money. Having a plan in place is key. Using NPCs will also help you identify opportunities to attend school without breaking the bank. Your wallet will thank you later.
Avoid Unnecessary Student Loan Debt
According to a 2018 report by the Federal Reserve Bank of New York, nearly 45 million Americans have student loan debt with national student loan debt surpassing $1.47 trillion— more than credit cards or auto loans. How many of these 45 million students convinced themselves that they would probably get scholarships only to find out that their dream school would expect them to shoulder the cost of college well beyond their means?
A fair guess is that some of these students at some point in the college admissions process believed that scholarships would magically become available to cover the hefty college tuition.
Most of these financial aid packages include large portions of tuition as student and/or parent loans. During the spring of senior year, parents quietly wrestle with how to pay for school while the unknowing student marches quickly towards high school graduation. Then the questions start coming: where are you going to college? Parents and students are eager to boast about the student’s plans, convincing themselves that somehow they will figure out a way to pay for the dream school. Everyone else is talking about sending their child to schools that cost $20k, $40k or even $60k a year. If they can figure it out, we can too. And before they know it, the student is moving into the college dorm saddled with student loan debt that many will carry with them into their adult life.