Use an Aid Calculator to Get the Real Cost of College

With schools required to create accurate cost-measuring tools, families get a better idea of fees.

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It's a sad reality that most families with teenagers believe that a school's price tag is priced just like a box of Corn Flakes.

If the price slapped on the Corn Flakes is $3.95, that's what shoppers are going to pay. If a college's published price is $39,000, then that's what families believe they must pay.

That, however, is not how it works in the higher education world. College price tags are largely meaningless. According to federal statistics, about two thirds of college students receive grants that will help them cut the cost of college.

It's the price tags though that are scaring families from broadening their college search. In a recent College Board survey, 59 percent of families eliminated college choices based solely on published prices. Yet looking beyond the most obvious and seemingly cheapest college choices is more important than ever during these tough economic times.

While higher ed insiders have been lamenting for years about this consumer disconnect, the way that families shop for colleges and evaluate prices should be changing soon. By October 2011, all colleges and universities must post net-price calculators on their websites.

These calculators have the potential to be extremely useful because they are supposed to help individual families determine what the cost of college will be for them and not for anybody else. The aim of these calculators is to pinpoint the net price that a family will pay after receiving any scholarships or need-based grants that a student would receive. Using the calculator, the cost of a $50,000 college, for some families, might shrink to $20,000 or $10,000 or lower.

So far all this sounds great, but here's a catch: Some of these net-price calculators might not be all that helpful. The calculator template that's been causing concern belongs the federal government. Critics say that the one-size-fits-all calculator, which any college or university is free to use, is too generic and doesn't ask enough questions.

StudentAid.com, which is creating calculators for colleges, evaluated 145,000 student profiles in its database using the federal calculator and it concluded that the tool omitted three important factors in determining awards: assets, household size, and merit awards. Admittedly, StudentAid.com is in the business of creating calculators, but there are plenty of other critics out there.

The federal calculator, suggests a white paper by Maguire Associates, a higher ed consulting firm, "has the potential to be grossly inaccurate due to its simplicity." And, the report goes on to say, "the Department of Education's calculator template leaves much to be desired for most potential users."

Here's one of the worrisome problems with the federal net-price calculator: It can generate misleading figures if a school gives out merit scholarships. And that's most schools.

Not all schools, however, are using the federal version. They are creating their own net-price calculators. Schools that already have calculators posted on their websites include Albright College, Amherst College, Bradley University, Purdue University, University of Arkansas, and Williams College.

"Schools that want to spend time and make sure students receive the right message are more likely to develop their own calculators," suggests Georgette Deveres, associate vice president of admission and director of financial aid at Claremont McKenna College in Claremont, Calif.

So, what's the bottom line? Ask schools what kind of calculators they are using, as well as how accurate they really are.