The Different College Price Tags
Are you a parent of a high schooler getting ready to
embark on the exciting college search journey? Congrats!
You’ve made it to the next chapter in your child’s quest for
independence and “leaving the nest.” It’s a big deal and
possibly an even bigger shock to your system at how
nuanced and sometimes complicated this process has
become. So take a deep breath and know that you can do
this. With some strategy, knowledge, and guidance, before
long, you’ll be celebrating college acceptances. But before
we get there, let’s begin with a quick tutorial on what we
consider the most important factor in finding your college
fit – the cost to you.
In this blog, we’ll walk you through the key differences
between the terms “sticker price” and “net price.” Both are
important to understanding the real cost of higher
education and how it affects your bank accounts.
Sticker Price – The Initial
Shock
Let’s start with the infamous “sticker price.” This is the
published cost of attendance, sometimes referred to as
COA, that you often see on a college or university’s
website or brochure. The sticker price includes tuition,
fees, room, board, textbooks, and other estimated
expenses for an academic year. For many parents, the
sticker price can be a source of sticker shock. It’s not
uncommon to see figures exceeding $60,000 or even
$70,000 annually.
While these numbers might seem overwhelming, it’s
important to remember that they do not reflect what most
families end up paying. The sticker price is a starting point,
not the final cost.
The sticker price is made up of two different types of costs
– direct costs and indirect costs. The direct cost is the
amount you pay to the actual school when you see your
college bill at the beginning of each semester. Direct costs
include tuition and fees and room and board. Note that if
your student lives off-campus without a meal plan, this will
move from direct to indirect costs. Indirect costs are what
you pay for expenses required to be a student at a
particular school, but you aren’t paying this money directly
to the college.
Indirect costs include books and supplies, transportation to
and from school, and other costs associated with college
life. Each school estimates average amounts for indirect
costs because they will vary from student to student.
Direct Costs:
1. Tuition and Fees: This is the core cost of
enrollment and varies significantly between
institutions. Public colleges are generally more
affordable than private colleges.
2. Room and Board: The cost of on-campus or off-
campus housing and meal plans contributes to
the sticker price.
Indirect Costs:
1. Books and Supplies: Textbooks, course
materials, laptops, and other supplies are
factored into the initial cost. Remember, this
amount depends on course requirements. You
may need things like computer programs and
uniforms, or you may be able to purchase
textbooks second-hand.
2. Transportation: This could be drastically higher
or lower than the estimated amount, depending
on how far away you live from school. Are you
driving or flying?
3. Miscellaneous Expenses: Most schools
estimate some extra for this category as other
costs associated with college life.
Net Price – A Realistic
Perspective
Now, let’s delve into the concept of “net price.” The net
price is the amount you’ll pay for college after factoring in
financial aid and scholarships. It’s a much more realistic
and manageable representation of the actual cost of
attending a specific institution than the sticker price.
The net price considers your family’s financial situation,
including income, assets, and household size. Colleges
use this information to calculate your Student Aid Index
(SAI). It used to be referred to as your Expected Family
Contribution (EFC), but the name has changed to make it
less confusing. Your SAI determines your eligibility for
need-based financial aid. The lower your SAI, the more
financial aid you’re likely to receive, ultimately reducing
your net price.
Understanding the details of how the net price is
calculated can help you grasp the nuances:
1. Student Aid Index (SAI): As defined by the FSA
office, “The Student Aid Index (SAI) is an eligibility
index number that a college or career school’s
financial aid office uses to determine how much
federal student aid the student would receive if the
student attended that school.” It is determined by a
formula established by the federal government based
on your family’s financial information.
2. Need-Based Aid: Colleges may offer need-based
financial aid, such as grants, scholarships, and work-
study programs, to bridge the gap between the sticker
price and your SAI.
3. Merit-Based Aid: Some colleges also provide merit-
based scholarships awarded to students based on
their academic, athletic, or artistic achievements.
4. Private Scholarships: Students can apply for
numerous private scholarships from organizations,
foundations, and corporations to reduce college costs
further.
Why the Difference Matters
Understanding the distinction between sticker price and
net price is essential for several reasons:
1. Budgeting: Knowing a college's net price is crucial
for budgeting purposes. It allows you to decide
whether a particular school is within your family’s
financial means. By comparing net prices, you can
determine which institutions offer the best value for
your money.
2. Comparing Options: Comparing the net prices of
different colleges can help you identify and prioritize
affordable choices during the application process.
Don’t be discouraged by a high sticker price; you
might be pleasantly surprised by the net price. This
information empowers you to create a list of colleges
that align with your budget.
3. Financial Planning: By considering the net price, you
can develop a more accurate financial plan for your
child’s college education. This might involve saving,
seeking additional scholarships, and making informed
choices about student loans. Understanding the net
price also allows you to set realistic expectations for
your child’s potential student loan debt.
How to Find the Net Price
To find the net price for a specific college, visit the
institution’s financial aid webpage. Most colleges have a
Net Price Calculator that allows you to input your family’s
financial information and estimate your net cost.
Additionally, you should complete the Free Application for
Federal Student Aid (FAFSA) to determine your eligibility
for federal and state aid programs.
Here’s a step-by-step guide to finding the net price for a
college:
Step 1: Gather Financial Information
Collect your family’s financial information, including
income, assets, and household size.
Step 2: Use a Net Price Calculator
Visit the college’s website, search for the Net Price
Calculator, or use our software for more accurate
estimates than most school net price calculators. Input
your financial data to receive an estimate of your net price.
Step 3: Complete the FAFSA
Submit the Free Application for Federal Student Aid
(FAFSA) online. This form is essential for determining your
eligibility for federal financial aid programs, including
grants, work-study, and federal student loans.
Step 4: Review Financial Aid Offers
Once you receive college admission offers, review the
financial aid packages they offer. These packages will
provide a breakdown of the scholarships, grants, and
loans available to your child.
Step 5: Compare Net Prices
Compare the net prices of the colleges your child has
been admitted to. This will help you make an informed
decision about which school is the most affordable option.
As you guide your high schooler through the college
application process, remember that the sticker price is just
the beginning. The net price provides a more accurate
representation of what you’ll pay. Understanding the
difference between the sticker price and net price is about
financial planning and empowering you and your child to
make informed choices and set realistic expectations.
Remember, college is an investment in your child’s future,
and with the right financial strategy, it can be a wise one.
Taking advantage of available resources and making
informed decisions can pave the way for your child’s
success while keeping your family’s financial well-being in
check.
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