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How Much College Debt Is Too Much?Guest Contributor
By Tamika Thomas
To prepare for college costs, many families look to the Net Price Calculator on a college or university’s website to get an idea of how much they will have to pay at that particular school (because there is almost always a difference, and sometimes a large one, between net price and sticker price).
Colleges don’t necessarily provide these calculators because they want families to know more about the price; they have them because they are required by federal law. According to the U.S. Department of Education, Net Price Calculators “allow prospective students to enter information about themselves to find out what students like them paid to attend the institution in the previous year, after taking grants and scholarship aid into account.”
Sounds great, right? Unfortunately, many families are not aware of the pitfalls associated with the Net Price Calculator, so they end up either discouraged (because the calculator gives them a higher number than expected) or excited (because the calculator gives them a lower number than expected). But you can’t really depend on the accuracy of the calculators.
Higher education is expensive, so it’s in the best interest of the colleges to present a simple calculation that makes families feel as though they may be able to afford to send their student there. They want to give them just enough information to satisfy the requirements without completely scaring them away with high estimates. The problem with this “bare minimum” approach is that some (but not all) Net Price Calculators leave families with a vague estimate that is not very useful.
To be compliant with federal regulations, a Net Price Calculator must:
Colleges are free to design their calculators however they want, as long as the minimum requirements are met. They inform users that the calculator provides an “estimate,” that it should “not be considered an actual award” or a “final net price,” and that it is “not binding.” But many of them do not inform their users about the different assumptions and formulas used to calculate the net price.
To obtain the most accurate estimate, a calculator must incorporate several data points that affect cost of attendance and ask its users numerous in-depth questions about finances and the student profile. Some college calculators do this; many do not.
Here are some reasons Net Price Calculator estimates may be inaccurate:
To complicate things even more, no two calculators are the same, making it difficult for a family to compare costs among colleges.
So, is the price that the Net Price Calculator provides a completely useless number?
No. But it should be considered a very rough estimate of college costs as opposed to a true predictor of actual costs.
The price calculated could also be compared to what your student actually receives on their award letter (if admitted to the school and offered a financial aid package). If the award you receive is significantly lower than the number provided in the Net Price Calculator, it is an indication that you should at least try to appeal and have your student's award reassessed.
If you would like a more accurate idea of what you can expect to pay for college, start the research and preparation process as early as possible. Consider getting help from trusted college funding professionals. Advisors like My College Planning Team allow free usage of their data form to families who want an accurate reading under both the federal and institutional methodologies.
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