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Understanding the Net Price of College

Families often experience sticker shock when contemplating the cost of college, but it’s the net price, rather than the sticker price, that prospective students need to consider. Each college publishes the COA or Cost of Attendance at that institution. The COA includes room, board, tuition and fees, along with an estimate for books, personal expenses, and travel to and from campus. The COA is the sticker price.

Relatively few families actually pay the full COA for their child. Instead, various grants, loans, and work study earnings all affect the actual net price of college. Let’s look at the factors that affect the net price. Net price depends upon the family’s individual financial situation as computed by the FAFSA (Free Application for Federal Student Aid), the form required by all colleges. The FAFSA will calculate an Expected Family Contribution, or EFC. Your actual net price, however, may be influenced by the college’s financial aid policies that determine the percentage of need they will meet, and further affected by how much the college actually wants a particular student to enroll.

Need is the difference between cost of attendance and expected family contribution. Some colleges will meet 100% of need, while others with smaller endowments meet a lower percentage of need. When a college strongly wants to enroll a particular student, they will offer grants to make up a larger percentage of the difference between need and COA. In addition to having excellent grades and test scores, certain applicants may be sought-after by colleges because they contribute to geographic or ethnic diversity, because they bring special abilities and aptitudes (musical, athletic, etc.), or because they have interests and skills in particular majors.

Your net price can be met in several ways. One component, the expected family contribution (EFC), might be met through the family’s assets, college savings plans, and/or loans. A second way to meet your net price is through self-help money earned through the student’s employment, and money that a student might borrow through a federal or state loan. The GAP is the balance needed beyond the EFC and self help, which can be met from family assets, income, or parental loans.

Merit aid is free money provided in the form of scholarships and grants because the college is eager to enroll that student. Applicants are most likely to qualify for merit aid if their GPA and test scores place them in the top quarter of accepted students. Soon after admission decisions are released, students who applied for aid will receive notification of their financial aid package. Compare these packages to determine the net cost of education to your family before making a final decision as to which college to attend.


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