Welcome to another action-packed edition of the Student Loan Ranger. We ride across your screen encouraging you to plan before you borrow and to earn your degree without drowning in debt. We also, of course, teach you how to manage the debt you do accrue. Check out our free student debt relief webinar, Drowning in Debt, on Friday, December 16, to learn about Income-Based Repayment, Public Service Loan Forgiveness, and loan repayment assistance.
With students finalizing and submitting college applications, we would be remiss if we didn't mention the new role of net price calculators in your college search. Colleges were required by law to post them by Oct. 29, 2011, so—while you may have to search for it—every school should now have a net price calculator posted on its website.
[Get more tips on how to pay for college.]
The net price calculator requirement is intended to prevent students from being scared away from schools by the sticker price (tuition, costs, and fees) of attending. As pointed out on U.S. News blog The College Solution, sticker price generally is not an accurate gauge of what many students actually pay because approximately two thirds of college students receive grants. But in the past, students usually didn't know what they would pay until they applied, got accepted, and received a financial aid award letter.
Enter the net price calculator: The idea is to prevent students from turning their backs on education by giving them an estimate of what they'd actually have to pay beforehand and allowing them to factor this into their decision on whether to apply.
[See how schools estimate your need for financial aid.]
Net price calculators have the potential to provide important information. Every calculator must provide:
Considering this is the minimum required, you can start to see the difference from a blanket number of tuition and fees. Remember, too, to consider (and limit) how much you're willing to borrow.
But do they work? Now that experts have had a chance to weigh in on the different sophistication level of the tools (some schools are using a one-size-fits-all template created by the Department of Education, while others have customized tools that account for their individual aid policies) and additional steps college applicants should take. We want to share some points we found interesting.
[Follow these steps to increase your financial aid.]
1. Are net price calculators accurate? This may seem like a no-brainer, but according to some experts (we're OK at math here at the Loan Ranger, but these guys are much better), simpler calculators that ask fewer questions give less accurate results. The College Solution has written about the costs of choosing simplicity over accuracy and we encourage you to check it out.
To give you an idea of the extensive information required to make student aid calculations, the FAFSA, which is used to determine students' eligibility for institutional and federal aid, utilizes 74 data points just to determine a student's expected family contribution and doesn't even factor in individual schools' aid policies. This year's FAFSA will be available after January 1, so be sure to fill it out; it's a prerequisite to receiving federal aid.
2. What about schools that have a high sticker price but offer a lot of merit aid? Simpler calculators probably haven't factored this into their resulting "net price." Experts suggest following up with schools you're interested in, and we couldn't agree more. Ask them whether the estimate is accurate and if there are other possibilities for assistance.
[Read about how to get the best financial aid package.]
We also always suggest doing this to find possibilities for grants and scholarships to minimize your borrowing. (Speaking of loans, the Consumer Finance Protection Bureau wants to hear about your private loan experience. There's a deadline, January 16, so be sure to let them know. Maybe we can get some student debt help on private loans.)
3. What effects could net price calculators have on schools, and in turn, on financial aid policies? Greater accuracy requires greater sophistication which requires calculators to ask more questions that correlate to individual schools' policies. This means the "inner workings" that determines who gets grants and why are revealed. And, as we have discussed previously, these inner workings sometimes result in lower-income students being priced out of education so schools can bring in students with the ability to pay larger amounts down the line. A significant question, as The College Solution so aptly put it, is if some schools will suffer when their policies are revealed before students apply.
We'd like to believe that revealing these policies will force a change and allow financial aid to be used as intended to increase access to education. Let us know below what effects you think net price calculators will have on applicants and schools.
Radhika Singh Miller is a program manager for Educational Debt Relief and Outreach at Equal Justice Works. In 2008, she served on the Student Loans Team in the Negotiated Rulemaking for the College Cost Reduction and Access Act (CCRAA) and has extensive knowledge of this landmark educational debt relief legislation. Radhika graduated from Loyola Law School Los Angeles and was most recently a staff attorney at the Partnership for Civil Justice, focusing on constitutional and civil rights litigation and advocacy.