If you were to ask the passengers sitting near you on a plane what they paid for their tickets, you would likely get many different responses. And the same is true if you pose a similar question to students attending the same college: What do you pay to go to this school?
Why do some students pay one “fare” to attend their college, while others pay vastly different amounts?
The Definition of Net Price
This situation — of different students paying different amounts for the same education — results from the widespread use of tuition discounting in both public and private colleges. “Net price” — that is, what students pay for college after all grants and scholarships are deducted — has become a much more relevant piece of information for families than the posted, or sticker, price.
Financial Aid and College Costs
Because of the astronomical rise in tuition, colleges and universities by necessity have had to offer financial incentives to help students who could not otherwise afford to attend (via need-based aid) and to attract those with strong academic records (via merit-based aid). In the 2013–14 academic year alone, institutions themselves awarded $37.9 billion in grants, which amounted to 36 percent of all higher-education grant money awarded that year.
The Net-Price Calculator
Because of concerns that the sticker price was keeping some students from applying to college altogether and other students from applying to relatively costly schools, the Higher Education Opportunity Act of 2008 required all colleges and universities that receive federal student aid (and that’s essentially all of them!) to place a net-price calculator on their websites by October 2011. The U.S. Department of Education provided a template that schools could use to develop their calculators, and about half of all colleges and universities relied on it to meet this requirement.
Approximately 230 institutions adopted another calculator developed by the College Board (one of the more detailed tools available), while a few other vendors produced calculators of their own. It’s worth noting that these tools are created by a limited number of developers, so one college’s calculator will often look just like another’s — a similarity that’s helpful when you’re filling them out at multiple schools.
Using the Calculators
The information that you need to provide on the net price calculators varies somewhat across the different tools, but, at a minimum, all require information about your family’s financial situation (not unlike the FAFSA) as well as other data related to the student’s family and personal background. Not all of these tools require information about academic background, even though this is typically used to award merit-based aid.
You should be prepared to spend about 15 minutes filling in the information on a net price calculator, but after you’ve completed one for a particular college, others should move more quickly. The College Abacus tool on Noodle allows you to save your information so that you only need to enter it once, even if you’re seeking out net-price calculations for many schools.
After you enter the required information, a “possible” net price is produced for each institution. It’s important to emphasize the word “possible” because the resulting price is in no way a guarantee of the price a student will pay (which may, as noted above, incorporate additional factors, such as academic accomplishments). The ultimate cost can only be known once the school sends the official aid package together with the offer of admission.
Understanding the Results
How should you interpret these net-price results? Very cautiously! At best, the calculators provide students and parents with a ballpark estimate of what they might receive in financial aid — net-price calculators do not offer guarantees.
Indeed, it’s conceivable that a student could end up getting more financial aid than the estimate provided by a particular institution’s calculator. This is frequently the case if the tool does not include questions about grade point average or test scores, as many colleges are eager to attract students whose academic background will improve the school’s national rankings and may grant more favorable aid packages to those students. Other factors, such as the qualifications of the overall applicant pool and the available institutional resources, can also affect the aid a student receives in any given year.
An Underutilized Tool
Despite the fact that net-price calculators are available on all college websites (although admittedly difficult to find at times), students are not necessarily using them. A 2012 survey of high school students who had taken the SAT found that more than half looked at the cost of attending college without considering possible financial aid offers. And even those students who used the calculators had reservations about their accuracy.
The Bottom Line
Net-price calculators can provide a reasonable sense of what is financially possible for a family at a given institution. They are particularly useful for students who may not qualify for need-based federal aid but who still need some financial help to attend college. Don’t assume that the net-price estimate you receive is the final price you will pay — rather, think of it as a reminder that most students get some type of aid these days, and that this financial support can vary considerably from one institution to another.
Ultimately, don’t price yourself out of a school before you do the net-price calculation. While you don’t want to take on a large debt burden, you don’t have to — even at schools with high sticker prices. Using a net-price calculator can help you figure out which schools might be affordable for your family.
Head to Noodle college search to check out what you’re likely to pay — and what the average net tuition prices are — at the schools on your list.
A Majority of Students Look at a College’s Sticker Price Without Taking Financial Aid into Consideration. (2013). Retrieved June 1, 2015, from Inside Higher Ed.
O'Shaugnessy, L. (2011, May 31). Don't Believe a College Sticker Price. Retrieved June 1, 2015, from US News & World Report.
Student Poll: Students Look at College Sticker Price. (n.d.). Retrieved June 1, 2015, from Art & Science Group.
Trends in Student Aid 2014. (2014). Retrieved June 1, 2015, from College Board.