Oct 23, 2019
How Net Price Calculators Can Better Serve Students
When deciding to make a purchase, consumers benefit from clear and transparent price tags. The selection of one item over another is made with an awareness of the costs (or savings) incurred from doing so. However, within the realm of higher education – where the stakes are often much higher – there isn’t the same level of transparency. Without accurate information, many students apply (or even commit(link is external)) to a college or university without complete information on how much it will cost them to attend.
To help address this problem, beginning in 2011, federal legislation required that all Title IV participating institutions – those receiving federal student aid funds – add a Net Price Calculator (NPC)(link is external) to their websites. By asking a few questions about a student’s academic performance and financial situation, among other things, NPCs should be able to provide a rough sketch of the student’s net price. In theory, this figure should account for the total cost of attendance – which includes average yearly tuition and fees, room and board, books, supplies, and transportation – minus any aid (need- or ‘merit’-based, federal, state, and institutional) that a student could potentially receive.
A net price calculation provides students with guidance on what they should expect to cover – through self-payment, outside scholarship, or, if necessary, loans – and may help to assuage student concerns about high sticker prices. However, as helpful as these tools are for financial planning, NPCs could still be so much better for students.
First off, the results of these calculators are meant to provide ballpark figures for first-year, full-time students, and therefore, provide estimates that are only valid for a first-time student’s first year in college. Though useful, most degree programs last longer than one year. A net price calculator provides no guidance for longer-term financial planning.
For instance, as highlighted in IHEP’s recent report Opportunity Lost: Net Price and Equity at Public Flagship Universities, the University of Arizona’s NPC produces reduced net price for students who qualify for the Arizona Assurance Grant(link is external). The grant guarantees up to $2,000 a year for four years, but also provides a one-time $7,300 subsidy for housing costs for only the student’s first year. While the net price estimate shows that a typical low-income dependent student will need to pay approximately $3,650, there is no warning that in subsequent years the same student could face bills of over $10,000.
Secondly, some NPCs fail differentiate(link is external) self-help financing (such as loans and student work) from gift aid (grants and scholarships.) With loans, either the award name doesn’t use the term ‘loan,’ or the loan amount gets lumped in with other forms of aid. Take, for instance, this University of California-Berkeley output (shown below) where $8,800 of student loans and work appear in the “Estimated Award” section.
The same output illustrates a third issue with NPC transparency. Many outputs fail to differentiate the varying sources of aid. In the example above, UC-Berkeley presents over $30,000 in aid without categorization. This stops students from knowing whether the institution, state, or federal government would be awarding the aid. Students might be left wondering whether the estimate already includes valuable federal aid like Pell Grants. For a low-income student especially, knowing where aid comes from (and what resources remain available) is critical for college financial planning.
NPCs have helped to provide students with better answers about the financial implications of attending a given institution, but it is clear that there remains room for improvement. The combination of unclear continued aid eligibility, hidden loans, and uncategorized aid can make NPC results less useful for a student. This reduces the ability of some students to make well-informed, long-term financial decisions when choosing which institution to attend and how to pay for it.
The Net Price Calculator Improvement Act (H.R. 1915/S.889)(link is external) aims to address some of these issues. This bill requires comprehensive cost of attendance and financial aid estimates for both a single academic year and the full regular-time length of an academic program. It also requires that institutions break down all grants by category and source. Finally, the bill allows the Department of Education to begin developing a Universal Net Price Calculator to allow for one-stop price and aid comparisons across numerous institutions.
All of these proposed steps are in the right direction. Students should have access to standardized and clear data that allows them to compare their costs for higher education across institutions. Through better data representation and standardization, NPCs can serve as a tool to help all students to better navigate the college process.
For more information about how we can use data to better serve students, check out the PostsecData website and follow us on Twitter(link is external) to keep up with events, updates, and conversations.