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What Can Clients Actually Expect to Pay for College?

Sticker prices are useless. A net price calculator can help parents determine what to expect to pay to send their kid to a certain school.

Most parents don’t pay the published price when sending their child to a college or university. But knowing that isn’t going to be much help when their child is exploring a college that can now cost more than $70,000 a year. What other huge purchase do Americans pursue where they have no idea what the final price will be?

Advisors can direct clients with teenage children to use a net price calculator. These invaluable calculators are designed to provide parents with an estimated price for their family from a specific college.

These calculators generate a family’s net price by subtracting potential scholarships and/or grants from the federal and state government and the college itself from an institution’s sticker price.

When using a school’s calculator, parents could discover that a $65,000 school will only cost them $20,000 or $25,000. On the other hand, some will be stunned when they discover that a college will charge them full price.

When money is an issue, parents should use these calculators before they let their teenagers apply anywhere.

By using these calculators, families can identify in advance schools that represent a bargain. And they can continue to look elsewhere if their children have fallen in love with six-figure budget-busters that could potentially blow up their retirement plans.

Here are nine things you should know about these calculators:

  1. Federal law requires that nearly all colleges in this country provide a net price calculator on their website. The tiny fraction of colleges that don’t offer one have opted out of the federal financial aid system. While it’s not required, some schools also offer net price calculators for transfer students too.

  2. To determine a student’s financial need, a college’s calculator will ask questions about a family’s finances. A superior calculator will require income and tax figures from the federal tax return of the parents and the child, as well as their current assets.

  3. If a school provides merit scholarships—the vast majority of colleges do—a thorough calculator will pose questions about the student’s academic performance. A calculator may ask for a child’s cumulative grade point average, scores on ACT and/or SAT, class rank and the number of students in the senior class.
    These calculators can be a great tool for teenagers who are wondering if they should retake the ACT or SAT. If the calculator suggests that the award will increase with higher test scores, it could definitely be worth the effort.

  4. Some of these calculators have some limitations. They use a federal template that asks very few questions. In fact, parents can complete a calculator in less than a minute. They don’t ask about household assets and only require parents to share their income within a narrow range.
    In addition, the federally inspired calculators can’t generate estimates on merit scholarships. They can only estimate need-based financial aid.

  5. A good calculator will ask for income figures from tax returns and the current value of nonretirement assets. A helpful calculator could take 10 to 15 minutes to complete.

  6. Your clients should ask colleges how accurate their calculators are. On its net price calculator website, for instance, Fordham University states that for 84 percent of students, the estimated net price is within $5,000 of the actual net price.

  7. Savvy parents will use a school’s calculator to research how home equity might impact an award. The vast majority of schools don’t use home equity in their aid calculations, but most of the elite private colleges do. Parents can plug their home equity into the calculator and run it and then try it again without the equity and compare the results.
    This exercise will be helpful when colleges won’t share with parents how they assess home equity. You should tell your clients that they can appeal the use of home equity in a financial aid award.

  8. Schools are not obligated to extend the price that their calculator generates. It’s possible, however, to appeal an award based on the net price verdict. Parents should print out the calculator inputs and results and hold onto them.

  9. Many colleges don’t make it easy to locate their net price calculators on their website. Surely one reason is because plenty of higher-ed institutions don’t like the federal mandate to provide them. The easiest way to locate a school’s net price calculator is to use Google.
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