Burned by college net price calculator estimates

Price calculators were supposed to make estimating the cost of going to college easier. But some families are feeling burned by them….

Net price calculators (NPC) became a mandated tool on all college websites last fall, but the Wall Street Journal reports that some estimates have turned out to be inconsistent with the actual costs families learned about this spring.  There can be several reasons for the inaccuracies, including errors in entering data, changed personal circumstances, outdated college costs, and flawed calculator design.

Families should understand that the NPC estimates can be a useful first step in comparing affordability among various institutions, but should not be relied upon for total accuracy.  It’s important to review the final report carefully for questionable results, such as the example where an NPC produced an ”estimated out-of-pocket cost” of $0 while also including loans amounting to more than $20,000.  Contact the college when you discover questionable numbers like this.

Some tips on interpreting NPC resuls from The Institute for College Access & Success:

• Be wary of estimates that include unrealistic amounts of self-help. We have found calculators that subtract $20,000 or $30,000 worth of expected loans to get to what might be called a “final” or “out of pocket” cost figure of zero. This can make colleges look more affordable than they really are. It may look like you will have no out-of-pocket costs, but the costs are just delayed.
• The results are only estimates and colleges can calculate them differently, so use them to make ballpark comparisons between colleges. Don’t draw conclusions based on differences of several dollars or even several hundreds of dollars – talk to the schools’ financial aid offices to find out more.
• The estimates are only for your first year of college and apply to a particular academic year (e.g., 2011-12). If you expect to enter college at a later date, know that the college’s costs and financial aid policies may change.
• Not all grants and scholarships are available for all years of college. You can contact the college’s financial aid office (or try searching its website) to find out whether you can expect the same amount of grant assistance after your first year.
• As all net price calculators are required to tell you, the estimates are not final or binding financial aid awards. To get an actual aid offer, you have to apply to the school for admission and fill out the FAFSA (Free Application for Federal Student Aid, http://www.fafsa.ed.gov/) to qualify for federal financial aid, and you may have to fill other applications for aid from your state or college. Net price calculators can help you decide whether to take those next steps.

What exactly is a Likely Letter?

A good explanation of a Likely Letter comes from the University of Virginia Admission Blog:

What is a Likely Letter?
Around this time of year [early March], many colleges and universities send letters to some very strong students telling them that their applications are impressive. These letters are commonly referred to as likely letters, but you might also seen them called love letters or early writes.

Why do you send Likely Letters?
In this day and age, it’s hard to feel confident about admission. These letters let some of our strongest candidates know we were impressed by their applications. These letters are not specific to UVa. Selective schools around the country send them. Doing a search for “Likely Letter” or “Love Letter” on College Confidential will yield signs of them being sent by plenty of other schools.

It must be exciting to receive a Likely Letter from your dream school, but remember that it is not a guarantee of admission.

A quick recap:

• Likely Letters are sent by many selective schools to some top applicants
• The vast majority of applicants will not get a Likely Letter
• Decisions are not finalized yet
• Getting a Likely Letter does not equate to an offer into one of the scholars programs
• Likely Letters are sent via standard mail

Do not read into the absence of a letter.

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Apparently Likely Letters have been more likely this year.

Why you want to choose the right college in the first place

The pressure is on for high school seniors to choose a college by May 1.  They need to think carefully about their choices because transferring schools during your college years will likely cost you in time and money.

Nearly one in three undergraduates who begin studying at a two- or four-year college will move on to at least one other institution in pursuit of a degree. That means, for one reason or another, a large share of students end up navigating the admissions process twice (if not several times), reorienting themselves to new campuses and negotiating the transfer and acceptance of their old credits.

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It can be costly

The research on these trends, while extensive, ultimately boils down to this: those who attend only one institution graduate in less time than those who attend several (and, in graduating quicker, pay tuition for fewer semesters).

Lionel Anderson gives advice to high school seniors on selecting the right college, focusing on these five factors.

1. Affordability
2. Size
3. Academic Support
4. Student Life
5. Diversity

A new tool for comparing college financial aid award letters

If you’re at the point where you have several college acceptances in hand accompanied by financial aid award letters, what is the best way to compare the bottom-line net cost of attending?

A new tool for comparing college financial aid award letters was recently introduced by the Consumer Financial Protection Bureau.

For each school you select, the “Sticker Price” first-year Cost of Attendance (COA) that includes average tuition & fees, room & board, books & supplies, and other expenses,  is provided.  Then you can enter the actual financial aid amounts from your award letters to see your personalized net costs.  The worksheet allows you to compare up to three schools at one time.

Here’s an example of a worksheet.  (Click on image to enlarge.)

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Keep in mind there are only three types of financial aid, as explained by Kalman A. Chany, author of “Paying for College Without Going Broke”

While the descriptions of the various aid programs will vary tremendously from college to college, there are really only three categories of assistance that will be in the award letter: gift aid (grants and/or scholarships), work-study job opportunities, and loans.

Be careful because the terminology can be confusing.

Sometimes the terms are confusing. Even the word “scholarship” can mean different things. Traditionally, a scholarship is based on merit; grants are based on need. Some schools, however, change the name of grants to scholarships to make you feel better about the award. Ask each college if the gift aid you have been offered is based on merit, need or a combination to determine the likelihood of getting such assistance in later years. Need-based aid is likely to vary from year to year, especially if a family does something to harm its chances of eligibility.

Even with the ever-increasing tools as well as the many sources of advice and facts, figuring out the college financial aid landscape for your own child can be a minefield of misinformation.

You can try using the new tool here:  Paying for College Cost Comparison Worksheet

Related:  When is an ‘award’ really a loan?

Purdue scholarship chart clearly spells out basics, but the devil is in the details

Basic information about Purdue University merit scholarships is clearly spelled out in an easy-to-read chart.  However, understanding important details below the surface calls for further scrutiny.

Here is Purdue’s chart.

Click to enlarge.

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I like charts.  They’re quicker and easier to use if I’m trying to pull out key information about how much college is going to cost.  Click the image on the right to see another chart showing all categories of financial aid at Purdue.

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Purdue is a state school ranked #62 on the USNews list of national universities.  It is particularly strong in engineering, included in the top ten of USNews Best Undergraduate Engineering Programs Rankings.  Other well-regarded areas include business, education, and health sciences.  Cost of attendance is $23,468 for Indiana residents and $42,480 for non-residents. (The maximum Trustee scholarship of $16,000 would put a significant dent in that non-resident tuition bill.)

Some details about Purdue scholarships

• Apparently merit funds vary considerably among departments, with the school of engineering reportedly having the largest budget.
• Applicants and students who switch majors may lose their scholarships, important to know since engineering is notorious for weeding out students.
• Purdue grading is tough, so maintaining the grades needed to renew a scholarship each year could be especially challenging.  Getting an A is hard for the Boilermakers with an average GPA that has hovered around 2.8 for over 30 years. Purdue doesn’t even seem to know that grade inflation exists in America. 

Considering the risks of losing merit financial aid, I would think long and hard before encouraging an out-of-state student to accept a scholarship to attend Purdue as an engineering major.  The stress of keeping up good grades in that environment could be overwhelming.

Is it wrong to be your kid’s administrative assistant?

Many parents believe there are valid reasons for acting as your kid’s administrative assistant in the college application process.  Here is how one mother expressed it in a CollegeConfidential thread:

I feel a like a helicopter mom… but my kid is so busy with 4 AP classes, tons of EC’s, and writing application essays like crazy. I’d rather she focus on getting A’s and writing good essays; I’ll happily do the labels and envelopes and online ordering.

College admissions is a high-stakes game, so I agree with this.

I am a helicopter mom when it comes to the college admissions because of one simple reason – it costs alot of money. I’m not just going to let my child go with it….

Kids tend to take the world as they find it, so unless the parent seeks out and presents opportunities, the kid is likely to miss some good ones. That’s been my primary role in the college search: suggesting colleges, arranging trip logistics, researching FA information and filling out EFC calculators.

In some cases, kids going it alone have needed therapy!

… Our D handled the entire college application process all by herself without asking or accepting any help from me or my husband. I’d like to point out that she was accepted to every single college she applied to. She applied for scholarships by herself and was awarded a full academic scholarship at the college she is currently attending.

The entire process was EXTREMELY STRESSFUL for her and she began to suffer from anxiety and depression for the first time in her life. We ended up getting her counseling. She is doing much, much better now….

D was very adamant about handling the entire admissions process without any assistance. I offered to help out on numerous occasions, but she firmly declined my offers. Even though it was extremely stressful, I believe that she gained a great deal of self-confidence. Believe me, I hated to see her suffer from anxiety. Her therapist agrees that she is a much stronger person now that she realizes that she is capable of handling life’s challenges on her own….

What’s the deal?  Can’t the average kid handle the college application process on his own without ending up on the therapist’s couch?  Why are parents so involved?

• It’s very expensive.  Parents who want to be sure they’re getting the best deal feel they need to step in because their child is not savvy enough to handle that aspect of the college search.
• It’s very competitive.  Applications often need to be packaged in a way that will make them stand out in the increasingly sophisticated enrollment management  process.
• It makes a difference.  Adding or removing a college from the list, not missing an important deadline, and suggesting essay topics can be key in opening up opportunities that otherwise would have been missed if a parent had let their kid go it alone.

Our local school guidance counselor did a terrific job in overseeing the college application process a few years ago, but from what I’ve read this is very unusual.  Many high schools are understaffed or poorly informed, leaving students to fumble through the college choices, applications, recommendation letters and financial aid information on their own.  Lucky is the kid whose parent will step in to help.

Your chances for merit aid are better at less selective schools

Less selective schools offer more merit money but less need-based money.  But if you qualify for need-based aid, your chances are generally better at the more selective schools.  [UPDATE: Tables revised to show corrected admission rates]

If you do not qualify for need-based aid, your chances for merit aid are generally better at less selective schools.  In the first chart above, moving down one step from the most selective private colleges more than doubles the average merit aid amount.  The standard advice is to apply to colleges where your test scores and grades would put you well within the top 25% of the student body to improve your odds for receiving aid.  Your statistics are viewed as a way to boost the school’s prestige.

“Schools compete with each other to attract talented students… “If you want to recruit some of those kids, one way to do it is through merit aid.”

… “Universities compete based on prestige, so if they want to increase their rankings in U.S. News & World Report, an easy way to do that is to bribe high-scoring students to come to your university with non-need-based aid,”…

In addition to boosting prestige, colleges know that relatively small tuition discounts that attract higher-income talented students often yield them more net revenue than the more generous scholarships they offer to lower-income students.

“That’s a fairly significant percentage of what’s happening, especially for universities and colleges that operate on a tight margin and where tuition revenue is an important part of keeping the lights on,” said Jonathan Burdick, dean of financial aid and admissions at the University of Rochester. “In those circumstances, giving $5,000 against a $25,000 tuition charge is just like the discounting you’d see in a retail operation to bring traffic to the door.”

The Harvard Effect is a factor, causing some colleges to feel compelled to follow Harvard and Yale’s lead in price-discounting to affluent families.

Universities say they also have been forced to pay out more aid to people who don’t need it thanks to widely publicized changes in financial-aid policies introduced in recent years by highly selective universities including Harvard, Yale and Stanford, which raced one another to give grants to families with income as high as $200,000.

* Merit aid is defined as grants “awarded to students without financial need or awarded in excess of need”.

Source data is from College Board Trends in Student Aid 2011:

Financial aid for international students – it’s complicated

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International students attending U.S. colleges often find that the search for financial aid can get complicated.

Writing in USNews, John Carpenter explains the basics.

Most financial aid in the United States is restricted to students who are from the United States or who are legal residents or green card holders—and, of course, that is all related to taxes and federal money. However, there is money available for international kids, just not a lot, and what’s available really varies from school to school.

A handful of schools have a lot of money for any kid, and a handful of schools have money just for international kids…

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Important to keep in mind:

• International aid varies widely – Some schools aggressively seek foreign students with financial aid while some offer no aid.
• Applying for aid as a non-U.S. citizen will impact admissions decisions at some schools.
• Students who do not hold US citizenship or are not permanent residents of the US are not eligible for federal financial assistance.
• Home country is sometimes the most important source of financial aid.

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Some schools that are generous to international students:

Six schools including Harvard, Yale, Princeton, Dartmouth, Amherst, and MIT are need blind regardless of a student’s country of origin. This means that if accepted, students obtain the necessary financial aid. Yet, financial aid is available for international students at a number of other colleges. Go to www.internationalstudent.com and discover, for example, that Stanford has 885 international UG students, of whom 203 were awarded, on average, $29,000 in financial aid. Aid is also available at USC and Pepperdine, though in much more limited quantities. Specifically, of Pepperdine’s 236 international students 60 were awarded aid, with each receiving, on average, $23,000.

Resources for international students:

• Scholarship Sources for International Students
• International Student
• Best Schools for Foreign Students
• Financial Aid for International Students

Related articles

• Don’t wait too long to request college financial aid (costofcollege.wordpress.com)

Only two of the top ten universities give out merit scholarships

While all the top ten ranked universities offer generous need-based financial aid, only two – University of Chicago and Duke – award merit scholarships.

First, here are the top ten universities as ranked by US News & World Report.

#1         Harvard University
#1         Princeton University
#3         Yale University
#4         Columbia University
#5         California Institute of Technology
#5         Massachusetts Institute of Technology
#5         Stanford University
#5         University of Chicago
#5         University of Pennsylvania
#10       Duke University

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Chicago offers less aid to more students

Chicago awards merit aid to about 10% of its freshman, averaging about $8,000 per recipient.  Here is the description from their website:

Merit awards are determined by the Office of College Admissions regardless of financial need and are guaranteed for four years of undergraduate study. They include the following:

• University Scholarship: Partial scholarships ranging from $5,000 to $15,000, renewable for four years
• Chicago Public Schools Scholarship: A full-tuition scholarship to selected students who have graduated from a Chicago Public Schools high school
• Police and Fire Scholarship: A full-tuition scholarship to selected students who are sons or daughters of active-duty Chicago police officers or firefighters
• The University also honors National Merit Finalists with a renewable award of $1,000 to $2,000.

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Duke offers more aid to fewer students

Duke gives merit aid to about 3% of its freshman, averaging about $25,000 per recipient according to US News reporting.  This excludes their athletic scholarships.  More information is available at their website, but you have to wade through the details to learn that some of these “merit” scholarships actually have a need component.  (I’ll write about this messy detail in a future post.)

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Scholarship information for both schools from USNWR, based on 2010 data

University of Chicago Non-need-based Scholarships/Grants
Average non-need-based scholarship or grant award (freshmen)	$7,772
Average non-need-based athletic scholarship or grant award (freshmen)	$0
Average non-need-based scholarship or grant award (undergraduates)	$12,854
Average non-need-based athletic scholarship or grant award (undergraduates)	$0 …

Duke Non-need-based Scholarships/Grants
Average non-need-based scholarship or grant award (freshmen)	$24,985
Average non-need-based athletic scholarship or grant award (freshmen)	$39,470
Average non-need-based scholarship or grant award (undergraduates)	$21,158
Average non-need-based athletic scholarship or grant award (undergraduates)	$38,398

Parents have misconceptions about price of college

Parents need to dig deep to know the true “net price” of college for their children.

Key points from the AEI Nothing but net: helping families learn the real price of college report:

• Six in ten families rule out some colleges because of sticker price, yet many do not know that the “net price” is typically far lower. Stanford’s sticker price for tuition, living expenses, and books is $55,918, while Cal State Long Beach’s is $20,675. But for some low-income students, aid discounts those prices to $4,496 and $3,593 respectively.
• To help parents and students make informed choices, the federal government now requires “net price calculators” on college websites. That is a start, but proactively teaching parents—especially those with lower incomes—to think in terms of net price is critical.
• An AEI survey found that a majority of parents do recognize a distinction between sticker price and net price after aid when asked to think of the cost for a low-income student. Low-income parents tend to overestimate the net price for their child.
• Three corrective measures: (1) generate net prices for the  schools students list on financial aid forms; (2) enlist guidance counselors to marshal relevant data; and (3) encourage web developers to create online tools that help to compare net prices across institutions.

It would be better if families could easily know upfront what the college costs would be.

For many families, though, the net price of college remains hidden until far too late in the process. Colleges engage in what economists call “price discrimination”: they set a sticker price and then tailor aid packages to reduce the actual cost of attendance based on student characteristics like family background, academic qualifications, and other accomplishments. Price discrimination is an important recruiting tool for colleges and universities, who use aid packages to attract the desired mix of students.

Related articles

• College costs – sticker price vs. net price (costofcollege.wordpress.com)
• The big news is that Seton Hall’s new tuition discounts offer ‘clarity and certainty up front’