What is a net price calculator, how does it work, and why should you use it? Well, we’ll get to that, but to make a long story short: it’s the financial aid tool you never knew you needed.
At a minimum, each college’s NPC should output the following information:
- Total cost of attendance (i.e., the list price) and a breakdown of its constituent parts such as tuition, room, board, and other expenses
- Total amount of awarded aid to all students (i.e., grants and scholarships)
- Net price—simply cost of attendance less total aid awarded
To provide this calculation, the NPC asks a series of questions about a family’s financial status intended to estimate the family’s expected family contribution (EFC). The EFC is determined from the information submitted in the FAFSA and is primarily based on the family’s income, assets, and other relevant factors such as family size, parents’ age, number of family members in college, etc. For many private colleges, a second financial disclosure form called the CSS/Financial Aid PROFILE is also used to determine EFC. (Keep in mind that need-based financial aid is determined based on a family’s EFC and not simply on their income. This complicates the calculation.)
As long as these minimum requirements are met, colleges have discretion in how they meet this federal requirement. As such, a diverse set of net price calculators have emerged across the collegiate landscape, making it a challenge to easily obtain net price numbers and even harder to compare one college to another.
Colleges differ in important ways in how they present their NPCs:
- Some ask a bare minimum of questions and have you select from a range of family incomes. These have the virtue of being simple and brief but at a cost of accuracy, as EFC cannot be precisely determined from just an income range. The estimated aid award they produce may not be correct.
- Some ask for complete financial disclosure, essentially mimicking the questions on the FAFSA. These have the virtue of being comprehensive and accurate but are time-consuming, complicated, and financially intrusive.
- Some ask for little or no financial input other than your EFC. These have the virtue of being simple and accurate but require you to already know your EFC. If you do not already have that information, you will need to first go elsewhere to an EFC calculator and then return with an estimate.
- Some provide your EFC as an output when you are finished so you know the basis for their decision but others are silent on their determination of EFC. This makes it more difficult to compare one college’s net price to another.
- Finally, some are very careful to separate loans from aid awards in their output results but others are not as clear and can be more confusing in their presentation of the net price.
As you can see, the financial aid process is not simple. It is a complex stew of competing forms, methodologies, acronyms, and calculations. However, even with these imperfections, the process is much improved by this federal mandate to have net price calculators. Families have the ability to get more insight into net prices than before the era of NPCs.
The next generation of net price calculators offers more clarity and comparability for families. For example, my website, Costoflearning.com, has created a universal net price calculator that addresses all of the issues raised above.
Again, this process is complex but with a little bit of planning and understanding, families can make well-informed and affordable choices.