Why the Net Price Calculator is Amazing
In a previous post, I briefly mentioned the Net Price Calculator, and didn't really give it its due. In this post I will talk about all the ways in which this new(ish) tool is so amazing, and how it can transform your search for schools.
In 2008, a mandate was passed by the Department of Education that required all schools who receive federal aid funds to include a calculator on their website that allows consumers to estimate what their out-of-pocket costs would be to attend that school. This is important because most people do not pay the "sticker cost" posted on the school's website. Schools use a variety of need-based and merit-based aid to help them attract the students they want to have at their school. Financial aid is part of their secret sauce and they really didn't want to have to share that information with the public.
Fast-forward to 2017, and there are a variety of ways schools have chosen to implement this mandate. I want to run through a few of them, and why its important to you, the consumer. I'll start first with the Federal Template.
The Federal Template
In order to make it easier for schools to comply, the federal government developed a simple template that schools could hook into and post on their websites very easily. It's totally basic, and does little more than meet the requirement. In my opinion, it doesn't ask enough questions to really let you get a sense of what your Net Price at that school will actually be, but at least it can give you an idea if you qualify for need-based aid.
You can tell schools who use this template because they typically have a really old clip art picture of a calculator on their Net Price Calculator page (like this one). I'm sorry, people at NIU, I really don't care about costs in 2014-2015. How about an update?? The NIU calculator says that their estimate includes merit and need based aid, but how can it when it doesn't even ask about the grades and test scores of the student?
In general I think schools who use the federal template do a pretty awful job helping consumers out, but that's just one thing to keep in mind as you assess where you want to spend your hard-earned college tuition dollars. At least it's a step in the right direction for transparency.
Better Net Price Calculators
For some schools, this mandate has given them the opportunity to really show what it might cost to attend their school. Some schools have partnered with 3rd party calculator-creators to implement pretty robust estimates. There are multiple companies who offer this service to schools, and as you try out calculators of different schools, you will probably recognize several of them.
These allow the student to get a better estimate, and the school to provide a better estimate. This benefits both parties.
So what does a good calculator ask? It asks all the questions necessary to help determine your EFC (estimated family contribution) like student grade, location, marital status, and dependency status. It also asks parent information on their marital status, ages, legal residence, siblings, and how many will be in college. It asks about student and parent assets and income too.
If the school uses the CSS/Profile, they may ask additional questions for more detail on parent and student assets, taxes, adjustments to income, medical expenses, private school tuition they've paid, and home equity.
Good calculators also ask about student GPA and standardized test scores (ACT and SAT), and I've even seen some that ask about National Merit Scholarship finalist status and other academic recognitions.
This might seem kind of creepy to you and you might not want to share this information. However, the more information you can share, and the more accurately you fill out the school's calculator, the better your net price estimate will be. If you're trying to express interest in a school and show them what a strong candidate you are, some even give you the chance to save your information (i.e. "Sign up for an account"). You need to weigh whether or not you want to do this.
The Amazing Part
As a financial planner, the amazing part is the insight these calculators give me (and you!) into the financial aid priorities of the school. I typically feel like the ones who use the federal template are not very helpful. The ones who use better calculators allow consumers to do a little testing to see what moves the needle on financial aid.
Would a higher GPA or test score translate into more potential merit aid? Does the school care about home equity? What kinds of special circumstances do they care about? If I can strategize about income timing and asset placement, what will that actually get me (if anything)?
It's worth your time to spend a little of it trying out the calculators of the schools your family is interested in. In no time, you'll be able to spot the good ones and understand more about the financial priorities of those schools!