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Net Price College Calculators

In the world of higher education, it's common to hear industry experts say that few students attending college pay full "sticker price," which is the official version of a college's total costs. Yet with nothing else to go on, many students end up basing their college search, and ultimate school selection, on just that--pure sticker price. But this may be about to change.

The Higher Education Act of 2008 requires colleges to install "net price" calculators on their websites by the fall of 2011. "Net price" is what a student actually pays to attend a college, after subtracting merit aid and need-based grant aid from the sticker price. The government's intent in mandating net price calculators is to provide students with a more accurate picture earlier in their college search of what they will likely need to pay at specific colleges based on their own financial and academic circumstances.

The problem

Each year, colleges publish their sticker prices on their websites and written materials. In a typical scenario, a college's sticker price may cause a prospective student (and his or her parents) to cross that college off the list early in the selection process, even though the student may have had a very good chance of receiving merit or need-based grant aid that would have resulted in a much lower net price.

This scenario is likely to play out more frequently as more colleges surpass the $50,000 mark. According to the Chronicle of Higher Education, 100 colleges charged $50,000 or more for tuition, fees, room, and board in 2010/2011. And more colleges will join their ranks next year if costs increase at the typical rate of about 5% per year.

The net price difference

The idea behind net price calculators, which are expected to take about 15 minutes to complete, is to give students information at the beginning of their college search about the merit and need-based aid they are likely to receive from a particular college based on the student's own financial and academic position and the college's specific criteria for awarding grant aid. The intended result is a closer estimate of the true costs of attending a specific college, as compared to the figures provided by a general college cost calculator or the federal government's aid application, the FAFSA, which provides families with their expected family contribution but does not take into account the aid awarding criteria of individual colleges.

In the typical financial aid cycle, high school students don't find out about their net price costs (and out-of-pocket costs) until spring of senior year, when colleges send out their financial aid award letters to accepted students. But by then, it's too late to plan. The hope is that by using a net price calculator much earlier in the process, students can make more informed decisions.

Tip:  "Net price" cost is different than "out-of-pocket" cost. Net price equals sticker price minus merit and need-based grant aid, while out-of-pocket cost equals net price minus work-study and federal student loans.

The calculator source

One final thing to consider: The federal government has created a net price calculator template that colleges can use on their websites to meet the calculator requirement. However, the early buzz from industry experts is that the government's "one-size-fits-all" calculator template doesn't always provide an accurate estimate of net price, especially for colleges that distribute a large amount of scholarships and merit aid. Rather, a calculator that is specifically tailored to a college's own aid awarding and packaging criteria is likely to offer a more accurate net price estimate. So if you run some numbers on a net price calculator, consider asking the college if they developed it or if they are using the federal government's calculator template.