It’s the season for colleges to accept students and then students to accept colleges. Part of the decision for many students is price, but comparing the actual cost of attending different colleges can be tricky. Here to help is Mark Kantrowitz, senior vice president and publisher of Edvisors.com, a group of web sites about planning and paying for college. He has written three bestselling books about financial aid, including “Filing the FAFSA: The Edvisors Guide to Completing the Free Application for Federal Student Aid.” This book is available for free download in PDF format for students and parents who register (also for free) on Edvisors.com. The book is also available for purchase in paperback and Kindle formats on Amazon.com.

By Mark Kantrowitz

The annual college choice challenge has begun. College admission decision letters start arriving in late March and early April. Soon after, they are followed by financial aid award letters. Students and parents have just a few short weeks before the May 1 deadline to decipher these often cryptic award letters and weigh the tradeoffs between college affordability and college quality.

The first challenge is to get a realistic breakdown of college costs. About a third of award letters do not include the full cost of attendance. Of those that list a cost of attendance figure, most do not list the full cost of attendance. Instead, they list just the costs that are paid directly to the college, such as tuition and fees. Other costs, such as textbooks, transportation to/from school and living expenses, are omitted. When these costs are included, they often understate actual costs, especially the estimates for textbook and transportation costs.

The second challenge is to figure out what’s a loan and what’s a grant. Financial aid award letters frequently mix grants and loans together in seemingly random order without clear distinctions between grants and loans. Most award letters list loans and grants with just an award name and a dollar amount. Loans are rarely labeled as loans, and, even then, may use an abbreviation like “L” or “LN”. Few families will know that a “SUB FED STAFF L” is a subsidized Federal Stafford loan. The financial aid award letters do not list interest rates, monthly payments and total payments next to loan amounts, or provide any other indicators that a loan is a loan. The most popular education loans include the Federal Stafford loan, Federal Perkins loan and Federal PLUS loan, but award letters might also include institutional loans and private “alternative” student loans.

The third challenge is to determine how much the college will really cost. Financial aid award letters often characterize loans as reducing college costs. The award letters include a net cost figure that subtracts the full financial aid package from the cost of attendance. But the financial aid packages include loans, which do not cut college costs. A loan is a loan is a loan. It must be repaid, usually with interest.

Some colleges argue that debt makes college more affordable, by providing cash flow assistance that spreads out the costs over time. But, loans are not really financial aid.  Moreover, the claims that loans make college more affordable are unsubstantiated, since few, if any, colleges monitor and report how many of their students graduate with total student loan debt that exceeds their annual income.

Instead of relying on the award letter’s net cost figures, families should calculate the net price, which subtracts just grants, scholarships and gift aid – money that does not need to be repaid – from the cost of attendance. Think of the net price as a discounted sticker price. The net price is a much more realistic assessment of how much the family will have to pay for the student’s college education.

Loans, then, are just options for financing the remaining college costs, after the family has paid what it can afford from current income and savings.

Unfortunately, even the net price is not a perfect measure of college affordability. About half of all colleges practice front-loading of grants, where first-year students get a more generous mix of grants than upperclassmen. The net price during the freshman year may be thousands of dollars lower than the net price in subsequent years. Colleges argue that front-loading grants minimizes the debt of students who drop out during the freshman year, but really it is just a form of bait and switch.

Students who have won many private scholarships should review each college’s outside scholarship policy. When a student who is receiving need-based aid wins a private scholarship, the student’s financial need has decreased. Colleges must reduce the need-based financial aid package to compensate. However, colleges have flexibility in how they reduce the financial aid package. If the college uses the scholarships to reduce the loans, the student’s net price will drop. But, if the college replaces its own grants with the private scholarship, the student has no net financial gain from winning a scholarship, and the net price remains unchanged.

The Obama administration’s Financial Aid Shopping Sheet is a step in the right direction. It provides a standardized one-page summary of the financial aid award letter that highlights the net price. Unfortunately, fewer than 2,000 colleges nationwide had voluntarily adopted the shopping sheet by the end of 2013. To be most effective, the Financial Aid Shopping Sheet needs to be made mandatory. This will lead to greater transparency and accountability on college costs and financial aid.