STICKER PRICE V. NET PRICE: CALCULATE THE DIFFERENCE FOR COLLEGE TUITION

College life can pose a number of new challenges for both students and their families. Completing applications, being interviewed, moving to a new dorm (and for many a new city or state), getting acclimated to a new community, and diving into an abundance of activities are only some of the hurdles that students are met with as they take on collegiate life. However, one of the most daunting obstacles for many families embarking on this journey is paying for college and figuring out a way to do this without breaking the bank. After making payments for applications, college visits, and new school supplies, the most expensive fees- tuition, room, and board have yet to be figured out.

Still, while students and their families may be turned off from certain schools when seeing their total cost of attendance, or “sticker price,” there is a silver lining known as the “net price,” which  reflects the actual amount that an individual family will be asked to pay. Understanding the difference between a school’s sticker price and net price is crucial in making a decision that is right for you and your family based on your unique financial situation.

Read on to learn more about these terms and how to calculate your own costs.

Sticker vs. Net Price

When you run a simple google search of a college’s total cost of attendance or see tuition figures in a college guidebook or brochure, the number you will find will typically be the sticker price. This price is usually quite high, especially in the case of private, selective universities. However, very few (if any) families actually pay the full sticker price annually.

You may be asking: if most families are not required to pay the full sticker price, what do they pay? That’s where we come to net price. The net price is essentially the sticker price minus any scholarships, grants, and financial aid that a student receives prior to admission. Paying a lower net price is contingent upon a number of factors, such as how many scholarships a student applies to and is rewarded and how much financial aid is offered to their family.

Class Matters: Financial Assistance vs. Merit Based Aid

Though scholarships and aid programs that seek to reduce a student’s net price are always welcome on the surface, it is important to note that they are sometimes allocated in ways that fail to completely address to increase the economic gap that bars low income students from attending the schools of their dreams.

A 2018 U.S. News and World Report on the 100 colleges that grant the most merit scholarships (or financial aid based on student academic performance as opposed to financial need) reveals that these schools provide assistance to anywhere from 33% to 58% of their student body. While low income students do often receive this type of aid, research has shown that middle and upper middle income students actually comprise a slightly higher percentage of merit scholarship recipients.

Factors such as the opportunity to pay for tutors and attend test-prep classes play a significant role in why students from wealthier families are able to maintain high standardized tests scores and thus qualify for merit based aid at rates that are higher than their lower income peers. Students for example who have to work jobs outside of school to help support their families even cite how those work obligations take away precious study time and can prevent them from achieving the test scores that they need in order to receive merit scholarships.

Thus, merit based aid can often suggest less about true merit and more about a student’s economic background and the privileges that it does (or does not) provide. As some colleges pivot towards offering more merit based aid than that which is need based, these disparities are important to keep in mind.

Schooling the System

While this may be an unexpected and unsavory twist to who benefits from the the sticker versus net price disparity , there are organizations working both on and off campus that are committed to providing aid opportunities exclusively for lower income students and their families. For example, in 2015 The Cooke Foundation launched the Cooke Prize for Equity in Educational Excellence. The Cooke Foundation awards $1 million per year to a university that must then use those funds to provide aid for low income students. Since its inception, Vassar, Amherst, and UNC Chapel Hill have been awarded Cooke Funds and later used the funds to help eliminate the income gap within their student populations.

Aside from Foundation funds and scholarships, a number of colleges also implement their own economic diversity programs and initiatives. For instance, Harvard’s Financial Aid Initiative aims to craft tuition packages that are affordable to any student regardless of their income. Other similar programs such as Berkeley’s Educational Opportunity Program are becoming increasingly popular– and relevant– at schools nationwide as well. For instance, at Amherst College in Massachusetts, a student from the lowest income tier could pay only $2,000 per year.

Offering application fee waivers is another step that some higher ed institutions are providing to build more equity into their applicant pool to eliminate the cost of applying, which can be prohibitive and create further exclusion.Waivers at institutions that have them require 0 parent contributions for families who either earn under a certain threshold — for example, at Stanford, families taking home less than $125,000 have their tuition fees completely waived — by some other measure of qualification that may include an additional essay or a simple request.

So What Does This All Mean for You?

Understanding the difference between the sticker and net prices of the colleges to which you are applying is extremely important. It may radically change what schools you believe are an option f. It is not uncommon for a student to fall in love with their dream college but choose not to attend or even apply once they learn that it has a high sticker price that their family could not possibly afford

However,please keep in mind that there are institutions and scholarship organizations available to make an expensive education feel like less of a barrier.

While the net price that you would be required to pay varies between school, there are a number of online programs that can help you calculate your estimated costs based on your income and a variety of other factors. Check out these net price calculators provided by College Board and NPR.

At the end of the day, shelling out thousands of dollars per year is difficult to do regardless of income. However, the first step to making the process less stressful is understanding how much your family will be required to pay and then moving on to make the best and most responsible decision about where to apply and ultimately, where to enroll. But before eliminating any application, first understand the myriad of possibilities and opportunities just waiting for you to explore.