College costs are confusing, often due to a lack of clear and complete information. It is necessary to understand the true cost of college in order to evaluate and compare grant letters.
When comparing college costs, there are three terms that enrolling students should become familiar with: attendance cost, net cost, and net cost.
In this article, we’re going to define each of these terms and explain their differences. We also explain why the estimated costs reported by universities can be misleading. Here’s what you need to know.
What does participation (COA) cost?
It all starts with the cost of attendance, which is the total annual college cost, not just tuition and fees. The participation costs are also known as the sticker price.
Participation costs include tuition and fees, as well as allowances for room and board, books, supplies and equipment, transportation, the cost of a PC, and other personal expenses.
In addition, there are optional allowances that are available upon request. These include grants for care costs, disability costs, study abroad costs, professional training costs, loan fees and costs for professional admission or certification.
Some college grant letters do not include the full cost of attendance. Instead, they distinguish between direct costs paid to the university and indirect costs. Students and parents may need to search the college’s website to find information about indirect costs.
What is the net price?
The net price subtracts gift grants such as scholarships and grants from the sticker price. It is effectively a discounted sticker price.
Only donations from the federal government, the state government and the university itself are deducted. Scholarships from private sources are not deducted from participation costs when defining the net price.
The net price is the amount of money that the family has to pay from savings, income and loans as well as from education tax breaks and private scholarships to cover study costs.
Since 2011, every university has been obliged to provide a net price calculator on its website. The net price calculator offers a personalized estimate of the student’s net price at the university. Net price calculators are useful tools to estimate the net price for a year before the student applies for admission and financial assistance.
What is the net cost?
Some universities give a net cost figure instead of the net price or in addition to the net price. It is important not to confuse the two.
Net cost subtract the entire grant package, including student loans, from the participation costs. The net cost is usually lower than the net price, from which only grants and scholarships are deducted. In addition to including student loans in the financial aid package, some schools also offer parenting loans, the so-called. “Packaging PLUS.”
“Advertising a net bill can be misleading …”
But loans don’t really cut tuition fees. They usually have to be repaid with interest. For this reason, funding a net cost figure can be misleading, especially if the grant notices do not clearly distinguish between loans and grants.
Why Estimated College Costs Can Be Deceptive
The participation costs and the net price provide cost information for only one year, the first semester.
But the costs in the following years are often higher.
More than half of the colleges practiced Frontloading of grantswhere there’s a better mix of grants and loans in the first year than in the second, junior and senior years of college. Other universities do not cut the scholarships in the following years, but the net price increases anyway inflation in tuition, fees, and other college expenses.
Families can use the Department of Education’s College Navigator tool to determine if a college practices pre-scholarship pre-allocation and to estimate a net price adjustment for every four years. That’s how it’s done:
- Expand the College Financial Aid Of Interest tab. There will be two sets of financial assistance information, one for full-time students (i.e. freshmen) and one for all undergraduate students.
- Examine the lines “Scholarships or Scholarships”. These provide information about the percentage of students given as well as the average amount of funding. If any of these numbers are falling, it could be a sign that the college is practicing upfront granting.
note: The numbers on the “Scholarship or Scholarship Grant” rows may also decrease if the college has many transfer students and is less generous to transferring them, or if the college has a very low retention rate for Federal Pell Grant recipients. However, these are not significant factors at most universities.
Related: What is the Average Cost of College?
How to customize your college cost estimates
In order to calculate an adjustment to the net price, it must be assessed how the gift grant and the study costs will change. Here’s how to do it.
Calculate your adjusted participation costs
- Find the percentage in the far right column under the Tuition, Fees, and Estimated Student Cost tab in the College Navigator.
- Select the appropriate row in the Total Cost section of the tab.
- Multiply that percentage by 1.5 and add it to 100%. Multiply the result by the total cost of attendance from the grant letter or college website. These are the adjusted participation costs.
Calculation of your customized gift aid
- Calculate the ratio of the average gift grant for all Bachelor students to the average gift grant for freshmen.
- If there is a significant difference in the percentage of grant recipients, then multiply that ratio by the ratio of the percentages. The resulting ratio is less than 100%.
- Multiply this ratio by the total donation aid in the donation notification. This is the adjusted gift grant amount.
Calculation of your adjusted net price
To calculate the adjusted estimated net price for the entire undergraduate program, subtract the adjusted gift grant amount from the adjusted attendance cost. For example, suppose a college has the following details:
- Participation costs: $ 35,000
- Average donation aid from freshmen: $ 15,000
- Average donation aid from all undergraduate students: $ 10,000
- Rate of inflation of university costs: 3%
First of all, it’s immediately clear (from the difference in average donation aid for freshmen and all undergraduate students) that this college clearly practices pre-granting scholarships. And we also see that the school’s tuition and fees have increased 3% each school year.
Let’s say you received a financial assistance grant from this school that totals $ 12,000 for a net price of $ 23,000. So, you would use the steps outlined in the previous section to adjust your gift grant amount, attendance cost, and net price.
$ 35,000 x (100% + 1.5 x 3%) = $ 36,575 adjusted attendance fee
$ 12,000 x $ 10,000 / $ 15,000 = $ 8,000 Customized Gift Aid
$ 36,575 – $ 8,000 = $ 28,575 adjusted estimated net price
That last number ($ 28,575) is much higher than the net price based on the first year grant letter of $ 23,000. This example shows why it is so important to calculate how your scholarship and study costs will change over the course of your academic career.
The problem of scholarship crowding out
Many colleges require students to report private scholarships to the college’s financial assistance office. Some of these colleges practice scholarship suppression, in which the college’s own scholarships are reduced if the student receives a private scholarship.
“If private scholarships are completely displaced, it will not change the student’s ability to pay for college.”
According to a recent study among college students, half of scholarship recipients are affected by scholarship displacement. If a student’s private scholarships are completely displaced, the student’s net price or ability to pay for college will not change despite the hard work of winning a scholarship.
Therefore, it is important to understand if and how a college practices scholarship displacement. Some universities publish an “External Scholarship Policy” on their website. Sometimes this guideline is specific enough to assess how winning a private scholarship will affect the net price. You can also ask questions of a college grant administrator, such as: “If I win a $ 10,000 scholarship, how will it affect my financial aid package?”
Two states – Maryland and New Jersey – have laws that prohibit the eviction of fellows. A, if adopted, The Helping Students Plan for College Act of 2021 (HR 5380) would require colleges to disclose their guidelines for transferring scholarships to prospective and enrolled students.
With various numbers to consider, calculating college costs can seem overwhelming. But with a little bit of research and a little basic math, you can quickly get a clearer picture of what you actually pay in total to get a degree from a given school.
And once you have a closer look at the cost of your college, it is time to think carefully about how you are going to cover it. For tips and ideas on this topic, Check out our guide: How to Pay for College.