Association for Public Policy Analysis & Management

Large differences often exist between a college’s sticker price and the net price of attendance after accounting for financial aid. With the 2008 reauthorization of the Higher Education Act of 1965, the US Department of Education introduced Net Price Calculators (NPCs) to help students estimate the actual costs to attend a given college. We assess the accuracy of information provided by selected institutions through their NPCs by comparing NPC estimates of financial aid to actual financial aid packages for a sample of low-income, first-year college students at seven postsecondary institutions. This study is guided by the following questions: (1) To what extent do NPCs provide accurate estimates of net college costs? (2) Where discrepancies between estimated and actual grant aid awarded exist, are these discrepancies more prevalent in certain sources of funding?

More than 50 percent of postsecondary institutions utilize the free federal template for their NPCs, and for this reason we limited our study to include only institutions using the federal template NPC. The federal template NPC draws on minimal data elements, making it straightforward to complete and arguably more likely to be utilized, but could sacrifice accuracy in exchange for simplicity.

We utilized student-level data to compare NPC estimates of grant aid with actual grant aid awarded, as reported in students’ financial-aid award letters. We limited our study to include only students qualifying for zero expected family contributions (EFC) to the cost of college, as low-income students may be particularly sensitive to information on college cost.

We find that NPC estimates of grant aid do correlate highly with actual grant aid, on average. However, we observed wide variation in actual grant aid awarded among students with an EFC of zero at the same postsecondary institution, with particular variation in grant aid provided by the institutions themselves. In the summer of 2014, several institutions in this study were presenting 2009-2010 tuition and net price information as the basis for their calculations. During this time, the average net tuition and fees paid by in-state students at public four-year colleges and universities increased nearly 50 percent.

Our results provide a proof of concept that even among students with similar socioeconomic profiles, NPC estimates can differ substantially from actual financial aid, in some cases overstating and in others understating the grant aid that a student would be awarded from a particular institution. We offer three key recommendations. First, in light of the substantial variation in institution-specific grant aid, we recommend that the information on median aid that NPCs currently provide be accompanied by information on variability, and potentially, on sources of that variability. Second, we advise colleges to update the data underlying the NPCs on a regular basis. With the costs of postsecondary education changing on an annual basis, the information provided by NPCs should be expected to keep pace. Finally, we recommend further exploration into whether additional selected data elements ought to be incorporated into the federal template NPC to enable schools to provide more accurate estimates.