It’s time for transparency in college pricing

Understanding the cost of a college degree can be difficult. That’s why since 2011 every college that accepts federal student aid has been required to post a Net Price Calculator on its website. Net price calculators should allow prospective students to learn their estimated cost of attending a particular college or university without having to complete the FAFSA, apply for admission, or actually enroll.

But, as we showed in a study published last week, Net Price Calculators are often not user-friendly tools. Instead, they can be confusing or misleading.

We aren’t the only ones to notice. Introduced by members of the U.S. House and Senate on March 27, the bipartisan Net Price Calculator Improvement Act recognizes three important realities. 

First, to make informed decisions, students and their families need to know how much they — given their own individual circumstances — can expect to pay if they attend a particular college.  Students who think a school costs too much, or that they won’t get enough grant aid, may end up bypassing schools they can actually afford. And students who underestimate the costs may become derailed if they enroll without having the financial resources they actually need.{mosads}

Second, net price calculators are one of the few mechanisms available to prospective students to get this information. Net price calculators may be especially helpful for the many students who attend high schools with limited college counseling and where secondary school counseling staff do not receive formal financial aid training, and when parents do not have prior experience with higher education.

Third, many of these net price calculators are not working the way they should. In our study, we found that not all colleges and universities have a net price calculator that is easily found on their website and consistently working. Other institutions have net price calculators that provide incomplete or misleading information.

The proposed legislation would take steps toward addressing some of the problems we found. The legislation could help to standardize the location of net price calculators on institutional websites. We were able to navigate from an institution’s home page to the net price calculator for 88 percent of the 80 institutions in our study. Despite repeated efforts, we were unable to find a net price calculator on the websites of two institutions. For five other institutions, the link to the calculator did not consistently work.

The legislation would also require the federally-defined net price (cost of attendance less grants and scholarships) to be the figure that is emphasized in the output. This was not the case for a third of the institutions in our study. Some of the schools in our study highlighted a price that includes only some of the costs of attendance — for example, tuition and fees and room and board, but not books and supplies and other costs.

To plan appropriately, students and families must know the current costs. About 40 percent of the schools in our study provided estimates using data that were three or four years old, ignoring the reality that tuition and other costs typically increase each year.

Students and families must also know the types of grants students may be eligible to receive, what they need to do to receive the grants, and the differences between grants and loans. Some of the institutions in our study showed that both grants and loans will reduce costs without making clear that — unlike grants — loans must be repaid.

The proposed legislation would also authorize the Department of Education to develop a “universal calculator” and require the Department of Education to report on its efforts to improve awareness of net price calculators. These provisions signal legislators’ recognition that it is now very difficult for prospective students and families to easily obtain and compare net price estimates for different institutions, given the different approaches institutions use to calculate and present this information. And, they imply the importance of ensuring that all students have the information they need to make informed college-going decisions.  

Laura Perna is James S. Riepe Professor at the University of Pennsylvania Graduate School of Education and executive director of Penn AHEAD. Follow her on Twitter @lauraperna1. Jeremy Wright-Kim is a doctoral student at the University of Pennsylvania Graduate School of Education. Follow him on Twitter @jwrightkim.