Have you ever been inside an amusement park’s “fun house”? Inside many fun houses is a room full of mirrors that give you a variety of images of how you look, at least in the reflection of those mirrors. Of course, the “fun” part is seeing yourself distorted by the various bends and contours of the mirrors’ construction. Well, finding out the “true” net cost of a college is a lot like being in that room full of mirrors. The truth is very often distorted.
A new report shows that six in 10 American families rule out some colleges based on sticker price, despite the fact that the net price, or the actual cost after grants, scholarships and other tuition discounts are factored in, is much lower, according to the American Enterprise Institute.
Let’s take a look at the key points of this informative report. Hopefully it will help you gain more confidence about considering colleges that you once thought beyond your reach.
The report opens with a sad but true prelude:
In recent years, students and parents have seen tuition costs at colleges and universities rise, to the extent that many low-income families may feel a college education for their child is out of their financial reach. However, this sky-high tuition is often partially, or even largely, subsidized by various forms of financial aid. For families to accurately evaluate the cost of higher education—and decide whether it is a viable option for their students—they must understand the “net price” concept.
Here’s a summary of key points:
- Six in ten families rule out some colleges because of sticker price, yet many do not know that the “net price” is typically far lower. Stanford’s sticker price for tuition, living expenses, and books is $55,918, while Cal State Long Beach’s is $20,675. But for some low-income students, aid discounts those prices to $4,496 and $3,593 respectively.
- To help parents and students make informed choices, the federal government now requires “net price calculators” on college websites. That is a start, but proactively teaching parents—especially those with lower incomes—to think in terms of net price is critical.
- An AEI survey found that a majority of parents do recognize a distinction between sticker price and net price after aid when asked to think of the cost for a low-income student. Low-income parents tend to overestimate the net price for their child.
- Three corrective measures: (1) generate net prices for the schools students list on financial aid forms; (2) enlist guidance counselors to marshal relevant data; and (3) encourage web developers to create online tools that help to compare net prices across institutions.
Skipping to the summary:
While not every student is a good fit for a four-year bachelor’s degree program, the idea that qualified students are failing to enroll because they mistake sticker price for the actual price they will have to pay represents a profound waste of human capital. Now that the calculators exist, policymakers, entrepreneurs, and educators must work to make sure that no prospective student makes an application or matriculation decision without first learning about net price.
You owe it to yourself to investigate the truth about college costs. Don’t pass up excellence in higher education because you fail to dig deeper into those images you see in the college and university fun house hall of mirrors.