Higher Education Policy and Practice

Net Price Calculator – Are You Ready to Comply with Requirement?

By October 29th of this year, colleges that receive Title IV student aid must post a net price calculator (NPC) on their website.  The requirement is one of the transparency provisions of the Higher Education Opportunity Act of 2008.  The Act was passed in response to national criticism about the rising price of a college degree.  This congressional concern is focused on independent institutions despite the fact that all of the increase in net price above the rate of inflation for the last ten years comes from dramatic increases in public sector tuition charges caused by reduced funding by state governments.  The statute requiring the posting of an NPC does not have a penalty section.  More than likely, the annual Title IV compliance audit will report if a college has failed to post an NPC on its website.

The purpose of NPC according to the act is: “to help current and prospective students, families, and other consumers estimate the individual net price of an institution of higher education for a student. The [net price] calculator shall be developed in a manner that enables current and prospective students, families, and consumers to determine an estimate of a current or prospective student’s individual net price at a particular institution.  You can read the requirements of the Act for the NPC by going to page 33 at this site:  http://ifap.ed.gov/dpcletters/attachments/GEN0812FP0810AttachHEOADCL.pdf

The requirement sounds simple – figure the cost of attendance by adding tuition and fees, room and board plus the cost of indirect expenses like books.  Next, subtract the median amount of government grant aid and institutional grants.  The result is the familiar net price of attendance.

However, what is a simple concept is devilishly difficult to actually compute so that it accurately portrays the unique financial decisions for a particular institution, that is meaningful for parents, and that complies with government requirements. To confuse matters, the NPC, be it a college or the federal design, uses medians for the cost of attendance and grants-in-aid.  Obviously, some applicants may be outliers for which the cost of attendance or potential grant-in-aid does not fit the strictures of the calculator.  For them the computed net price will be meaningless.

For a college, especially, a small college that chooses to design its own NPC reflective of its admission decisions, the effort may turn into an extremely difficult task. You can see the DOE draft template and how it works by going to the following site: http://nces.ed.gov/ipeds/netpricecalculator/.

Before a college makes a decision on whether to design its own NPC or to use the DOE’s template, it must assess its own risks, such as:

  1. Data errors in computing medians
  2. Parents who make errors in entering personal data
  3. Errors in capturing the cost of attendance and grants-in-aid
  4. Liability to parents for large errors in estimating the net price
  5. Failure to comply with the Department of Education mandates regarding the calculator
  6. Compliance with American Disabilities Act in cases where someone cannot access an institution’s website or if they have a disability that prevents them from using the website
  7. Constraints imposed by the calculator during periods of rapid inflation.

Stevens Strategy is available to assist colleges in complying with the requirement to have a net price calculator on their website by October 29th.  We can assist you in the following ways:

  1. Determine which will be more useful for your college to develop your own NPC or to use the DOE template.
  2. Identifying the data that is needed for the NPC
  3. Designing the NPC
  4. Placing it on your college’s website.
Originally posed March 23, 2011

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