The Lawlor Review

The Higher Education Opportunity Act of 2008 requires every college or university that administers federal student assistance to make available and accessible the information consumers need to understand its cost of attendance and to make accurate comparisons across institutions. One element of the legislation is a soon-to-be-enforced mandate that colleges and universities host a net price calculator on their websites. But will this indeed bring transparency to the issue of cost? Or will the net price calculators only increase public confusion and frustration?

For the past decade, the soaring cost of college has been a prominent point of public debate and a favorite topic of the media. So in mid-February when The University of the South (Tennessee), better known as Sewanee, pledged to cut their 2011-12 fees by 10 percent, it was no surprise when prospective and current students celebrated the news and the story received a lot of favorable, high-profile press.

“Bucking Trend, College Will Cut Price,” declared The New York Times article featuring Sewanee Vice Chancellor John M. McCardell, Jr. announcing the news. “The university has made a bold and perhaps risky move,” explained McCardell. “But given the realities of higher education in the current economy, we believe that some college or university needed to step up and say, ‘Enough.’ ”

However, those in the know were a bit more cynical about what the University’s cost-cutting move actually would mean for students. In a New York Times editorial on the subject, Sandy Baum, emerita professor of economics at Skidmore College (New York) and a frequent commentator on the economics of higher education, called attention to the practice of discounting, the use of non-need-based aid, and the difference between sticker price and net price. Regarding Sewanee’s price reduction, Baum concluded, “Indeed, many (most?) students may not experience any decline at all in the net price they pay.”

And therein lies the problem: Most students and their families are in the dark about what the real cost of college might be for them. The terms “discounting,” “sticker price,” and “net cost” baffle them when they simply want to know what the bottom line will be for their pocketbooks.

Enter the net price calculator (NPC). Mandated by politicians and intended to bring transparency to the issue of costs for consumers, NPCs are required for nearly 7,000 post-secondary institutions by October 29, 2011. The mandate applies to all Title IV institutions that enroll full-time, first-time degree- or certificate-seeking undergraduate students; in other words, most four-year colleges and universities as well as community colleges, technical schools, and even for-profit institutions are affected by the requirement.

But with only a few months left to become compliant, many institutions have yet to find an NPC solution. More troubling, the public seems scarcely aware of their existence. Will the NPC be the solution Congress anticipated?

The Calculator Movement

Since America’s post-war college boom, there has been a steady and lively discussion about the cost and value of post-secondary education. But in the last decade, with a perfect storm of declining economic conditions, increasing consumerism, and deteriorating graduation rates, the debate has reached a fever pitch. Issues like access, affordability, quality, and accountability in higher education have been deliberated on Main Street and on Pennsylvania Avenue.

“After the Spellings Commission [2005-06], the political climate included lots of discussion about controlling college costs,” recalls Jim Miller, coordinator of enrollment research at the University of Wisconsin-Superior and current president of the National Association for College Admission Counseling (NACAC). “The press was focused on sticker price, and some in Congress suggested we should put limits on college costs.”

Others made the case that it was inappropriate to paint all colleges and universities with the same brush stroke. “Private colleges argued that their tuitions weren’t as high as they appeared once one considered discounts, particularly in response to need,” says Nathan Mueller, principal at Hardwick-Day, a higher education consulting firm that focuses on enrollment optimization. “So Congress basically said, ‘Fine. Show people the real net cost.’”

Thus the “calculator movement” began with a push toward transparency.

As defined in the Higher Education Opportunity Act (HEOA), the net price calculator’s purpose 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 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.”

To help institutions meet the NPC requirement, the Department of Education has designed a fully functional calculator template. Colleges and universities may use the calculator template or develop their own customized calculator—either in house or with the help of a third-party vendor—so long as it includes the same minimum elements as the Department’s template. Using student-entered data, the Department’s calculator allows prospective students to determine their estimated net price at an institution based on the following basic formula: the average price of attendance for full-time, first-year undergraduates minus the average need-based and merit-based grant aid.