Net Price Calculator in the News

Testimony before the Advisory Committee on Student Financial Assistance

by Bill Smith, Senior Director of Business Development, Student Aid Services, Inc., March 17, 2011

Thank you to the Advisory Committee on Student Financial Assistance and its panel of higher education experts for the opportunity to provide our perspective on how the implementation of net price calculators will affect prospective college students, their families, and post-secondary institutions.  I am Bill Smith, senior director of business development for Student Aid Services. Several years ago, I began working with colleges building custom, online financial aid calculators for Williams College, Yale, Arcadia, and Roosevelt Universities. Today we are providing net price calculators to nearly 200 college campuses nationwide.

It is an overstatement to say all colleges welcomed a new requirement to post online net price calculators. However, the majority of the colleges we encounter are doing their best to comply not only with the letter of the law, but to extend the spirit of cost transparency as well. Today I will focus on the emerging ‘best practices’ by a variety of post-secondary institutions providing families with the accurate and timely data they need to make sound decisions about post-secondary education. I will also suggest additional guidance the U.S. Department of Education could consider.

 Much of the academic research about college access during the past two decades has lamented the absence of the ability of students and their families to know well in advance of applying to colleges how much financial aid they could likely expect to receive. The result is a disconnection between the amount a student will actually pay – their personal net price – and an institution’s cost of attendance, or sticker price. As this committee reported in 2005 in The Student Aid Gauntlet, the lack of personalized net price information is a barrier to accessing college – especially for low-income students.  This conclusion was echoed the following year by Susan M. Dynarski and Judith Scott-Clayton whose research report The Cost of Complexity in Federal Student Aid stated that high school students most sensitive to cost are unlikely to start down the path to college if they do not know their education is affordable. This report noted, “For those on the margin of college entry, concrete information about aid simply arrives too late.”More recently, the White House Task Force on Middle Class Families in 2009 decried that sticker shock, which comes from the inability of students and parents to estimate their cost of attending college, limits the efficacy of aid and discourages students from enrolling in college.

The intent of net price calculator mandate is to close the information gap, described in research such as The Student Aid Gauntlet and the 2009 report Crossing the Finish Line: Completing College at America’s Public Universities. Answering the question: “What will my college education really cost?”  lets prospective students know college can be affordable and improves the likelihood that families make well informed decisions.  Accurate, personalized aid eligibility insight shouldencourage college aspirations, academic preparation, access, and persistence.

Since the Higher Education Opportunity Act was signed in 2008, we have listened as college administrators across the country weigh the ramifications of providing accurate aid eligibility and net price estimates before a student applies for admittance. Many are concerned because their college may appear expensive – that is, the ‘sticker price’ seems especially high. Some worry about inaccurate calculations that could greatly overestimate or underestimate students’ aid eligibility and net prices. Underestimating aid could discourage prospective students from applying, while overestimating aid could mislead students.

Despite the concerns of some college leaders, many believe students and families are best served when provided the most accurate, personalized cost estimates possible. Our experience is that colleges want to do their best to present students with an accurate cost picture.

The most important insight that we share today is that hundreds of post-secondary institutions of all types and sizes have posted or are in the process of installing net price calculators that far exceed the minimum NPC requirement.

For example, the University of Arkansas’ net price calculator determines not only a prospective student’s aid eligibility and net price, but also details an individual’s available financial resources, including work-study and federal loans.

Purdue University in Indiana has been a leader in offering a net price calculator that allows a student to email her or his results so they can engage in substantive discussions with family members or school counselors.

West Virginia University, Newman University in Kansas, and Baldwin-Wallace College in Ohio are among a dozen colleges whose veteran-friendly NPCs calculate Post 9/11 GI Bill and Yellow Ribbon benefits.

A Spanish language option is not a requirement for NPC. Nevertheless some institutions are offering Spanish translation with one quick click on the calculator.  We expect many other to do the same during the next few months.

Two Ivy League colleges, which took the initiative to modify their need analysis and packaging to make themselves more affordable, are going the extra mile to ensure those initiatives are incorporated into their NPCs.  Another leading Ivy League institution offers a calculator that takes family farm ownership into special account.

Albright College in Reading, Pennsylvania provides a net price calculator that even estimates a student’s monthly re-payment of federal education loans to help families better evaluate college affordability and make informed decision about which college is the best fit for their personal circumstances. We know of at least 13 institutions whose NPCs determine the total cost of a degree and we expect hundreds of others to adopt this practice.

One college in North Carolina provides NPC users video instructions, while another in Minnesota offers a graphical representation of a student’s cost.

Although the federal NPC mandate only requires net price estimates for first-time, full-time students, Southern New Hampshire University is among the first to provide an NPC that caters to populations other than first-time, full-time students. We estimate as many as 1,000 colleges are planning to post NPCs designed to help different student populations, such as working professionals.

Some schools, such as Berea College in Kentucky, offer a very early estimator for students in 9^th grade and younger. These early estimators may help motivate students to work hard during high school and encourage families to save for college.

Lastly, but very importantly, several college administrators, representing nearly 100 campuses, plan to configure their NPCs in coordination with new “borrow less” programs.  We believe the connection between NPCs and “borrow less” programs will grow.

These are some of the examples of how institutions are innovating to provide students and families with a much clearer picture of what they might pay so they can make a sound decision about how best to advance a student’s education. We believe the law’s language stating that as long as the minimum requirements are met, a college may incorporate additional information in its NPC, has encouraged many of these innovations.

We do not advocate that this advisory committee promote any new requirements regarding the NPC mandate. We do suggest the U.S. Department of Education provide additional guidance about accuracy to promote greater confidence among prospective students and their families that the estimates they receive are reliable. Three elements drive an NPC estimate – expected family contribution, need-based aid, and merit aid – and different accuracy guidance would apply to each of them.

Another concern colleges have raised with us is the desire to protect the confidentiality of their aid award programs from competitors while providing the most accurate and personalized aid estimates to students. This could be accomplished by allowing colleges to prepare personalized estimates with a reasonable time, such as 24 to 72 hours, and then email or mail the information to students, rather than providing instantaneous answers online. Changes in the Department of Education’s compliance interpretation to allow institutions to require name, email,  and address information from NPC users would open this avenue to institutions.

Lastly, we suggest guidance be provided on the placement of NPC Web links to ensure the visibility and prominence necessary to attract and benefit as many prospective students as possible.

            The Student Aid Gauntlet aptly stated that the current system encourages students to apply to college without knowing with any certainty if they can afford it. Many past studies have shown families typically overestimate college cost and underestimate available financial aid resources. As this round table’s participant Elise Miller of Department of Education has stated about the mandate, “We just want to break down the myth of ‘sticker price’ and get beyond it. This is to give students some indication that they will not be paying that full price.”

Our conclusion is that the NPC mandate is encouraging many colleges to serve students and their families by going well beyond the minimum requirements for net price estimation and offering much more transparent, helpful, and personalized information.

Read the complete news release