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College Shopping: Price Check Please

Posted on 05/17/2017, by Dr. Ellen Fithian (0 comments)


Imagine this scenario. You're shopping in a clothing store where the price of items ranges from expensive to exorbitant. On the bright side, you know that many items are sharply discounted, but on the down side, you won't learn the discounted prices until after you've made your selections and are ready to check out. At that point you can decide whether or not to purchase each item, but you won't be allowed back into the store to look for alternatives.

Sounds ridiculous, but this is pretty much the situation that families once faced while shopping for colleges. During the application - or shopping - phase, the only price they saw for a college was its sticker price, the full cost of attendance. Not until the end of the process - after the student was accepted - did they get their financial aid award letter and learn what their family would actually be expected to pay. At that point the applicant could accept or decline the college, but couldn't go back and apply elsewhere.

Clearly, this was a highly unsatisfactory situation.

Fortunately, college shopping has become much less frustrating thanks to a federal law that went into effect in October of 2011. The law requires each college to post an online financial tool, called a net price calculator, that allows an applicant to get an early, ballpark estimate of what he or she will actually be asked to pay at the school.

What is the Net Price?

In order to make sense of net price calculators, you first have to understand what net price means.

Let's begin with the sticker price, or Cost of Attendance (COA). The COA for a particular college is the  complete cost of attending the school for a year; the grand total of tuition, room and board, and estimated expenses for books, supplies, transportation and personal necessities. The COA is what a student who gets no financial aid would pay.

The net price is what a particular student actually pays after taking into account his financial aid award. Simply stated, it consists of the COA minus any grant money (financial aid awards that don't have to be repaid).

How Do Net Price Calculators Work?

Let's suppose you want to get a net price estimate for Dream U. After locating its net price calculator online, you provide answers to a series of questions about your family's financial circumstances. The information you provide is not sent anywhere so you don't have to be correct to the penny; the purpose of the net price calculator is purely to help you get an idea of what the college will cost your family.

When you've answered all the questions, the calculator generates an estimate of what your family's net price would be at Dream U for the following year. The estimate is just that - a ballpark figure, not an offer or a guarantee, but getting net price estimates at all the colleges your teen is considering allows you to compare their likely costs to your family, which is a great deal more meaningful than comparing their sticker prices.

Of note, please be aware that using a college's net price calculator does not constitute applying for financial aid at the school. When your teen decides which schools to apply to, you and she will still need to complete a detailed government form (FAFSA) in order to be considered for financial aid.

I've only touched the surface of how to find and make the best use of net price calculators. To learn more, I strongly suggest you read the Net Price Calculators article in the guide section of this website.


 

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Posted on 05/17/2017, by Dr. Ellen Fithian (0 comments) « Previous Entry

 

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