In just a few days, colleges will be required to post net-price calculators on their Web sites. In a guest post, Marvin Smith, senior associate director of financial aid at Purdue University, describes how calculators could change the financial-aid process for families. Mr. Smith will present on this topic at a session of the College Board Forum on Wednesday.
In accordance with the Higher Education Opportunity Act of 2008, by this Saturday, October 29, each postsecondary institution in the United States that participates in Title IV federal student aid programs is required to post a net-price calculator (NPC) on its Web site.
So will NPCs help families make good decisions about college choices? Or will NPCs make the financial-aid process even more confusing? It depends on whether you see the glass as half full or half empty. I happen to be a fan of the NPC effort, so I guess I see the glass as half full. Keep in mind I am a diehard Cubs fan, so I could be accused of being a delusional optimist.
While I’m not a fan of intrusive federal regulations, I am a fan of being able to give families an idea of how much it really costs to attend college. Families deserve at least an attempt at a transparent answer to this question as they make a college attendance plan. Without an NPC, families are left to scour a college’s Web site to find sticker prices. Even the task of finding a sticker price on a college Web site can be daunting because it might be on an admissions, financial aid, or bursar page.
The pessimist—I mean, critical thinker—in me knows that the NPC effort has some inherent problems and limitations. An NPC can be difficult to use, it can only provide estimates based on historical information, and it cannot usually provide a good estimate of merit-based aid eligibility. NPC results are only as accurate as the information submitted—and remember that garbage in means garbage out. Even the name Net Price Calculator is misleading—it should be called a Net Price Estimator.
I am a fan of the education NPCs provide families. Without an NPC, families are forced to sit on pins and needles waiting for financial-aid award letters, without any idea of the mysterious criteria used to determine financial aid. For many middle-to-upper income families, the financial-aid award letter they receive in April is the first time they find out they will not qualify for grants or scholarships. Families deserve better. An NPC allows families to self-serve with an anonymous calculator and avoid developing unrealistic hopes of aid eligibility based on “expert sources” like internet advertisements, friends, or neighbors.
Some folks in the financial-aid profession are pessimistic about NPCs. Private institutions are worried that their financial-aid packaging philosophies will be divulged to competitors (probably so, but such is the age of transparency…). Some worry that an NPC may cause a backlash of ill-will if we somehow provide a family with an incorrect estimate of financial-aid eligibility. Some don’t think NPCs will be worth the effort to develop and maintain.
I am an optimist about NPCs based on my experience at Purdue. As we developed our financial aid estimator we had a few priorities: Make it easy to use, make it anonymous, and make it educational. Since the system was rolled out in August of 2008 it has consistently averaged 5,000 to 6,000 financial-aid estimates per month (except the slower months of May and June). Peak usage has neared 9,000 estimates per month. While we are not able to track the number of unique users of the system, we know Purdue families (and professional colleagues) are using it. And we know we are receiving significantly fewer phone calls from families complaining about actual financial-aid award letters in April.
The NPC requirement is part of a larger federal initiative regarding college cost transparency. The National Center for Education Statistics (NCES) has developed a relatively new website called the College Affordability and Transparency Center at www.collegecost.ed.gov on the College Navigator website. This site maintains the average net price for first-time, full-time students who receive financial aid at each college, as well as the net price by income categories for Title IV participants, and a multiyear tuition and fees calculator for undergraduate programs.
If you visit this site you may be underwhelmed—I know I am as a financial-aid professional and the parent of a college-bound senior reviewing college costs. This site does a great job of maintaining a “naughty list” of postsecondary education “offenders” who are extra expensive or have raised tuition or net cost extra quickly. But it does not allow users to quickly review college costs for multiple schools based on information they have entered.
Yet I am also optimistic about the College Navigator site. I believe it is an underutilized gold mine of critical college information and can help consumer transparency. I hope NCES and the Department of Education see this potential too. For example, I suspect the College Navigator site could be quickly modified to allow an NPC-like experience for users. It could also be promoted as a single-stop for families exploring college costs at multiple schools.
NPCs cannot substitute for good guidance and mentoring by school counselors and college admissions and financial aid staff. These professionals play a critical role in helping students make good decisions. At the College Board National Forum, I am optimistic we will continue to have productive discussions regarding how counselors can help make the cost of college more transparent for families.