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Posted at 12:05 PM ET, 10/03/2011

Guest post: Don’t bank on the net-price calculator

Here is a guest post from Helen Nunn, director of financial aid at Susquehanna University in Pennsylvania. It’s part of an ongoing conversation about the net-price calculator, which all colleges are required to publish by the end of this month. Here is an example.

A bit of context: The federal government wants colleges to help families calculate every school’s “net price,” or what a student should expect to pay after accounting for financial aid, to help them determine whether a particular institution is affordable. College leaders worry, though, that net price is too complex to predict for individual students using a single formula. They fear that families will put too much stock in what the net-price calculator tells them.

On the face of it, I understand why families would be taken in by the idea of the newly required Net Price Calculator (NPC). Anything that could help you narrow your list of schools to those you can afford, and could make it simple to get an answer to that question, would be a welcome tool. And anything I can do on the Internet without interacting with pesky people and their prying questions would be a relief, too. Right?

Well, maybe . . . and maybe not. I actually think it’s a good thing if the NPC gets families thinking earlier and more seriously about what college might cost. If it nudges them in the direction of evaluating their finances and beefing up their savings plan, then I’m all for it. What I worry about, though, is that they’ll type in their data, get an answer (of sorts) and think that they can take it to the bank. Worse still, they’ll make decisions based on the estimated data, and that would be a shame.

I know, I know, we will all print caveats galore to make sure that families understand that what they are getting is “only an estimate,” but we are creating an expectation that we will not always be able to meet. Won’t that be even more confusing?

The whole process of obtaining financial aid can be a daunting and mysterious one, and that is largely due to its complexity. By working so hard to simplify things, we lose any nuance or ability to deal with folks’ individual circumstances. If you complete a couple of NPCs for different schools, will that be the way you decide whether it’s worth pursuing admission and aid at a school?

In our effort to make sure that we are providing the fairest and most accurate aid decisions for families at our institution, not only do we collect significantly more information than is required by the NPC, we also collect prior-year federal tax returns to shore up the data. Do you have any idea how often we have to make changes to families’ reported data when we make the comparison? The answer is about 98 percent of the time. If you extrapolate that ratio to the way people will enter their data on the NPC, a 98 percent error rate (of varying degrees and outcomes, of course) means that the results of the NPC will reflect at least that error rate.

So, go ahead and crank your data through some NPCs, get some idea of what your family may be expected to pay, but don’t let that be the last thing you do. No calculator is going to take the place of a conversation with someone in the college’s financial aid office who can advise you about changing family circumstances, about how studying abroad will impact the aid award or a host of other possibilities. People — students and their families and the financial aid staffs at the institutions — are still the biggest part of this equation.

By  |  12:05 PM ET, 10/03/2011

Categories:  Access, Aid, Admissions, Finance, Public policy

 
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