With the cost of college going through the roof and college debt growing at an alarming rate, Net Price is rapidly becoming the most important factor to consider when deciding on which college to attend.
You won’t learn exactly what your Net Price is at a given college until after you are accepted and receive your financial aid package. This often arrives late in the senior year, long after you’ve spent time, money, and stress on the application, campus visit, and interview(s).
But, is it possible to get a realistic idea of what a college will cost you before you go through the hassle and expense of applying to that college? The answer is YES you CAN by understanding what Net Price is and how it’s determined.
What Is Net Price?
Net Price is the actual amount of money you are responsible for paying to attend a college.
Your Net Price at any school is a simple equation:
Net Price = COA – Free Money
The Cost of Attendance, or COA, at any college or university is its “sticker price,” and is posted on each college’s website. COA includes tuition and fees, room and board, and an average cost of books, supplies, and personal expenses.
Free money is money given to you for college that does not have to be paid back. Free money includes federal, state, and college GRANTS (based on your financial NEED), and SCHOLARSHIPS, (based on your academic, artistic, or athletic achievements).
Federal and state grants are straightforward and you can find out what you qualify for by submitting the FAFSA (Free Application for Federal Student Aid) or getting a quick estimate immediately with the government’s free online calculator, FAFSA4caster. Scholarship money is more difficult to predict and may not reduce your net price anyway (more on that below). The real wild card is the size of the college grant you will receive, which depends both on the college’s financial aid policies and how much that college wants you to attend.
There Are Three Components to Your Net Price
- Your EFC (Expected Family Contribution)
- Need-based self-help aid (federal and state education loans and work-study)
- The GAP (the dollar amount of unmet financial NEED you are responsible for covering)
Learn Your EFC and Your Financial NEED at Each School
The first step in determining your Net Price is to establish your financial NEED. College’s use the simple equation:
NEED = COA – EFC
Your EFC is the minimum amount of money your family is expected to pay each year toward the COA unless you receive a scholarship that is greater than your need (see below) or your EFC is greater than the COA. Since every college has a different COA, your NEED will be different at different colleges. Your EFC is determined by an analysis of your and your parents’ income and assets on the FAFSA. Like federal and state aid, you can learn your EFC by submitting your completed FAFSA or get a quick estimate immediately using the government’s FAFSA4caster.
Learn more about EFC here : Your EFC, What It Is, How It’s Calculated, and Why It Matters
Learn How Colleges Build Financial Aid Packages
The first step colleges take in building your financial aid package is to reduce your NEED by any scholarship money you either bring with you from an outside source or get from the college itself.
This is a startling revelation to most families. Because most colleges use scholarships to reduce financial need, any scholarship you are awarded will only reduce your EFC if it is larger than your NEED.
Second, colleges apply federal and state need-based financial aid to your NEED in this order:
- Federal and State Grants you qualify for
- Federal Perkins ($5,000 max) and/or Direct Student Loans ($5,500 max for first-year students)
- State Higher Education Loans (if available)
- Federal Work-Study (college-sponsored on-campus student employment)
If you have any NEED left after these have been applied, most colleges will award you a need-based grant from their own funds that will cover all or some part of your remaining NEED.
It often comes as a huge shock to families to discover that more than 96% of all US colleges and universities do not give you a large enough grant to meet your full remaining need. Instead, they leave you with a GAP in financial aid—costs you are expected to cover. Every school meets a different percentage of a student’s need based in its financial aid policies.
Learn the Size of the GAP You’re Likely to Have in Your Financial Aid Package
The only way to get a good idea of the size of the GAP you’re likely to get in your financial aid package is to hunt down an important statistic of each college of interest– the average percent need met*.
For example, assume your NEED at a college is $15,000 and the college meets, on average, 85% of need. You can estimate they’ll give you a $12,750 GRANT and a GAP of $2,250. If, however, the college meets an average of 60% of need, you can estimate getting a $9,000 GRANT and a GAP of $6,000.
The size of your GAP will be greater or less than the average depending on how much the college wants you to enroll. But using the average in your initial assessment can help cross some schools off your list right away due to a likely large GAP in your financial aid package.
The bottom line of what you’ll actually pay at each school is summed up in this equation:
Net Price = EFC + Federal and State loans + Work-Study** + GAP
Learn How to Minimize Your College Costs
EFC and the size of your GAP have a big influence on the size your Net Price. Discover strategies for finding schools where you are likely to get a smaller than average GAP, tips to getting your EFC as low as possible, plans to pay Net Price, methods to reduce your overall college costs, and much more in our college admissions online, on-demand video courses and materials.
*Find the average percent need met in a college’s common data set, on its USNews Best Colleges page, or contact the school to get this important statistic.
**Because Work-Study wages must be earned during the school year, the costs the award covers are included in your bill.
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Updated September 15, 2018
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