Here is a guest post from Bob Clement, a former college president and congressman who now serves as president of Clement & Associates, a government and public affairs firm. 

Many college administrators, college-bound students, and media observers are beginning to realize that 2011 marks a major change in the college cost information available to those deciding which school to choose. Starting Oct. 29, those prospective students (and their parents) will be able to see a personalized price-tag upfront on college Web sites by using federally required technology called net price calculators .  The full ramifications of the availability of the new planning tool are just beginning to become clear.

Historically, most colleges have published only their ‘sticker price,’ or the standard cost of attendance. But over the years it has become increasingly apparent to policymakers in Washington (and some states) that many students don’t actually pay the sticker price but some lesser amount based on financial need, academic merit or other factors. Under the requirements of the federal NPC mandate, colleges must post a calculator on their Web sites that computes ‘net price’ (defined as tuition, fees and indirect expenses minus grant and scholarship aid) for individual students based on their personal or family financial status. As of the Oct. 29 deadline, students and families will be able to get a much clearer picture of estimated costs and make more practical comparisons of ‘net price.’

In my years as both a member of Congress and a college president, I heard from families facing anxiety and confusion over college costs. For example, while at the helm of Cumberland University, I was part of a team that advanced the school from a two-year to a four-year institution.  I anticipated much of both the excitement and trepidation that came with the dramatic change at Cumberland, but there was one aspect of the move that I did not foresee. Students, although enthused by the opportunity to earn a full bachelor’s degree, worried how they could make the additional financial commitment. As I listened to their concerns, I realized then more than ever that determining the cost of college for a particular student was a very complex and sometimes even mystifying process. Years of this kind of first-hand experience with the challenges of estimating college costs have led to my keen interest in the college cost transparency trend now underway.

Why NPCs?

Prospective students and their parents often begin the college selection process with strong notions that can lead them astray when answering that basic question, “How much is college really going to cost?” For example, some parents assume their honors student will earn a full-ride merit scholarship to a well-known institution. Others assume their low income precludes their child from attending an expensive college or any college at all. These kinds of assumptions are common and can be very wrong.

The timing of a student’s college selection and application process versus his or her financial aid packaging at a particular school has always been part of the problem with understanding the true cost of college. As they embark on college selection, students and many parents don’t understand that they may not see the total bill for college until well after applications have been submitted. That’s how the process works -- most students apply for admission to a college before they apply for grants, loans or other types of student aid and therefore they don’t know their individualized price until late in the process. Policymakers have come to realize that prospective students and their parents need the means to get a useful estimate of a college’s real cost earlier in the school choice timeline. The solution: net price calculators.

The NPC mandate provisions in the Higher Education Opportunity Act of 2008’s net price calculator mandate aim to improve the process.  Author and college advice columnist Lynn O’Shaughnessy anticipated the impact of the mandate well ahead of most observers last year in US News & World Report.  She wrote, “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…Using the calculator, the cost of a $50,000 college, for some families, might shrink to $20,000 or $10,000 or lower.”

Calculator Options for Institutions

Before choosing which net price calculator to implement, most of the nation’s postsecondary institutions considered the Department of Education’s “federal template,” a tool for schools to build their own NPCs. The template requires no licensing fee and includes a very short question set. Despite those benefits, the template does not seem to be the best option for many colleges that put a high value on presenting reliable estimates to their prospective students. The federal template was designed for all of the more than 6,500 postsecondary institutions required to implement an NPC. The template determines an individual student’s net price at a college through a combination of averages, rather than formulas that are individualized to the specific student and school.  Accuracy was understandably sacrificed for simplicity in the federal template’s one-size-fits-all approach.

 In a recent article by Beata Mostafavi at the Flint Journal, a financial aid officer at a university using the federal template summarized the inaccuracy problem with the very simplified technology: “When families see what is called the cost of attendance, many times they get sticker shock.” O’Shaughnessy confirms the point that when it comes to the calculators one size really doesn’t fit all schools: “It (the federal template) can generate misleading figures if a school gives out merit scholarships. And that's most schools.”  

 The Flint Journal article goes on to describe how a more sophisticated and customized Kettering University NPC avoids the sticker shock issue by providing a more accurate estimation of financial aid. 

Our team at Clement and Associates surveyed dozens of colleges about their NPC choice. Rather than installing the federal template, it appears schools, like the competitive Kettering University, are selecting more accurate calculators from third-party providers or building their own calculator technology.

Our research indicates that there are as many as 10 providers offering alternatives to the federal template. Sacramento-based Student Aid Services, with more than 500 schools under contract nationwide, is the leader amongst several reliable NPC providers. Student Aid seems to have built a market lead with technology that is the most customizable, offers the most options for users and institutions, and probably is the most accurate.

 “When looking at NPCs, we wanted to be able to get good information out to students and to use it as a recruiting tool,” said Kim Donat, Director of Student Financial Aid at Indiana State University. “The first calculator we implemented wasn’t robust enough, so we’ve switched to Student Aid Services. They have provided us with an NPC that has a brief question set and accurate results, and they have been very responsive and helpful along the way.”

Two other well-known companies in higher education, the College Board (SAT provider) and the enrollment focused Noel-Levitz, compete for institutions that want more of a ‘do-it-yourself’ solution. The College Board calculator, for example, can be installed by an institution in as little as 40 staff hours. Both the College Board and Noel-Levitz appear to be Student Aid Services’ nearest competitors, each with close to 250 net price calculator clients.

More than 1,000 of the nation’s leading colleges that have chosen a customized NPC are using one of the three leading NPC firms (Student Aid Services, College Board, or Noel-Levitz), but there are two other advanced calculators in the field. The college enrollment consultant firm, Hardwick Day, offers an NPC with a notable degree of customizable features and functionality, as does the much smaller AidCalc. These two operations serve fewer schools (Hardwick Day has fewer than 100 clients and AidCalc a few dozen), but appear to come somewhat closer to matching Student Aid’s level of customized calculator technology.

Carleton College is a Hardwick Day client and Rod Oto, Associate Dean of Admissions is encouraged by how the Carleton NPC has been received.  

“I know some college administrators complain about the mandate, but I do think it will serve students well, if we can get them to use NPCs,” said Oto. “When choosing an NPC for Carleton College, we thought about the complexity of our aid awarding process and we wanted the calculator to represent how we make those decisions. We are getting good feedback on our Hardwick Day Associates calculator.” 

Leading state universities like The University of Arkansas, University of North Carolina, University of Mississippi, University of Virginia and University of Vermont have chosen customized calculators, as have Ivies like Cornell, Harvard and Yale.

Some observers told us they are surprised that the move to use technology considered “much better than the federal template” has extended to all types of post-secondary institutions. 

For example, most of the community colleges in Vermont and West Virginia are using Student Aid’s calculators, and those in Kentucky are using the College Board’s. When all NPC providers and state system sponsored calculator technology are included, it appears that as many as 1,300 institutions have already chosen NPCs that exceed the minimum requirements of the federal mandate. Some of these calculators include extra features such as military aid for college estimations, Spanish translation, peer school comparisons, and monthly loan payment calculations. We estimate that the number of colleges using these types of more accurate calculators may grow by another 300-500 between now and the October mandate deadline.  

What Next?

 I have five predictions about what is ahead for the move to more cost transparency in higher education.  First, I predict that well regarded college advice writers such as Jacques Steinberg at the New York Times, Kim Clark at Money Magazine and O’Shaughnessy, among a score of others, will offer college bound students and their families highly valuable insights regarding how to use, when to use and where to find net price calculators. O’Shaughnessy recently wrote in U.S. News and World Report: “This is a no brainer, folks. Use the calculators.” 

Second, I predict the nation’s leading financial advice gurus like ­­Suze Orman, Dave Ramsey, and Clark Howard will make college net price calculators a new part of the money management wisdom they provide. Twenty million students attend some form of post-secondary institution every year, at least 12 million receive some type of financial aid, and many millions more are in the process of considering college or some other type of post-secondary education. The market for helping these millions make smart choices about education is enormous.  The best of the net price calculators available now or soon to be available at hundreds of colleges are just the kind of tools these star financial gurus will embrace.

My third prediction is that over the next two years high school advisors and college counselors will make using net price calculators a common practice in their guidance to prospective students and their parents. That advice will make a difference. NPCs can help students from relatively lower income families realize that the actual prices of even the most expensive colleges can be within reach.  For example, Vanderbilt University, in my home state of Tennessee, is considered an expensive school, but to its credit Vanderbilt meets 100 percent of a student’s need (which is the gap between the cost of attendance and a student’s expected family contribution).  The University stretches to be surprisingly affordable for students from lower income households and that’s the kind of fact that will become better known as NPC use becomes a common practice for college counselors and the college bound.

Fourth, I predict policymakers at both the state and federal levels will continue to encourage more accurate, more useful calculators at all types of post-secondary institutions. Some critics have called for the “standardization” of net price calculators, thereby requiring common input and result formats so as to make apples-to-apples comparisons easier. It’s a legitimate point to consider, but the trade-off of “dumbed down” standards on colleges that are offering accurate calculators now, compared to the net price results of short, simple but highly inaccurate calculators, would not serve anyone’s interest. Instead, pushing for more accuracy and consumer-friendly features is the common sense solution most consistent with the spirit of the NPC legislation. Hundreds of schools have installed sophisticated NPC technology that gives students and parents the most practical and accurate college cost information ever available. The trend toward more useful information for the college bound will not be turned back.

My final prediction is that presidents and other top college administrators who haven’t engaged in their institutions’ NPC decisions will do so soon. Our interviews with schools confirmed a growing realization among many leading colleges that the presentation of “net price” (the particular price a particular student will pay a particular college), can become a central part of how institutions communicate to prospective students and their parents. A Maguire Associates report sums up the point in Insights for a Challenging Economy, “Colleges and universities now face a defining strategic choice. On the one hand, institutions can merely comply with an obligation imposed by government, perhaps in some cases hoping that a head-in-the-sand approach will make the problem go away. On the other hand, some will embrace the NPC and use it to their advantage, and in doing so play a productive role in shaping and leading the transparency movement. After all, the NPC presents a major opportunity for institutions to communicate that they are more affordable than many students and families believe.” 

One thing is certain: as of Oct. 29, any prospective college student that doesn’t ask, “What is this college really going to cost me?” will be making a poorly informed decision. Similarly, any institution that doesn’t provide a useful and accurate answer to that question may risk losing the trust of its most savvy prospects and their parents.