NET PRICE CALCULATORSA Brief Overview and Issue Areas

Anthony JonesSenior Policy Analyst

ADVISORY COMMITTEE ON STUDENT FINANCIAL ASSISTANCE

NCASFAA Spring Conference– Wilmington, NC – April 2011

AGENDA

•Advisory Committee on Student Financial Assistance

(ACSFA)

• Net Price Calculator (NPC) Background

• ED’s Template

• Customization of NPCs

• ACSFA Spring Hearing

• Hearing Panelists’ Themes

• Questions

• Higher Education Amendments of 1986 established the Advisory Committee on Student Financial Assistance; reauthorized in each subsequent set of amendments

• Serves as an independent and bipartisan source of advice and counsel on student financial aid matters to both Congress and the Secretary of Education

• 11 appointed members serve terms of 4 years

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THE ADVISORY COMMITTEE

BACKGROUND: HEOA

The Higher Education Opportunity Act (HEOA):

• Signed into law on August 14, 2008

• Includes many new disclosure requirements

• Requires that institutions have a net price calculator on their websites for full-time, first-time degree/certificate-seeking undergraduate students

BACKGROUND: The NPC Requirement

• Deadline• Institutions have 2 years from the release of the U.S. Department of Education’s template to post their net price calculator: October 29, 2011

• Options1)Use the ED’s NPC template

2)Customize the NPC to meet institutional needsA. Use a third-party provider

B. Create NPC in-house

BACKGROUND: Purpose of NPCs

“…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.”

- P.L. 110-315,sec 132(h)(1)

THE TEMPLATE: Development Process

• NCES worked with the Office of Postsecondary Education (OPE) to oversee development of the template

• A Technical Review Panel (TRP) meeting was held in January 2009

• The goal was to keep the template simple enough that it could be used by all Title IV institutions, recognizing that some institutions will have an interest in customizing their calculators

THE TEMPLATE: How It Works

• Institutions input the following data:• Price of Attendance

• Median amounts of grant aid awarded to first-time, full-time degree/certificate – seeking students by EFC range

• Users input their data – which approximates their EFC

• The template uses a look-up table which identifies the student’s EFC range based on the inputs the student has entered and then finds the corresponding estimate of median grant aid that student will receive

For more information on how the template functions: http://www.ifap.ed.gov/presentations/attachments/24TheNewInstitutionalNetPriceCalculatorRequirementinHEOAV1.pdf

THE TEMPLATE: Net Price

Estimated net price is calculated by subtracting estimated total grant aid form the estimated total cost of attendance

Institution’s cost of attendance for FTFT students

Institution’s cost of attendance for FTFT students

Total need- and merit-based federal, state, and institutional

grant aid awarded to FTFT students

Total need- and merit-based federal, state, and institutional

grant aid awarded to FTFT students

Number of FTFT students receiving such aid

Number of FTFT students receiving such aid

Cost of attendance = average annual cost of tuition

and fees, room and board, books, supplies, and

transportation

Cost of attendance = average annual cost of tuition

and fees, room and board, books, supplies, and

transportation

THE TEMPLATE: Minimum Required Inputs

• Data elements to approximate the student’s Expected Family Contribution (EFC)• Such as income, number in family, and dependency status or factors that estimate dependency status

• An institution may use either Federal Methodology or Institutional Methodology to approximate the student’s EFC

THE TEMPLATE: Minimum Required Outputs

• Estimated total price of attendance;

• Estimated tuition and fees;

• Estimated room and board;

• Estimated books and supplies;

• Estimated other expenses (personal expenses, transportation, etc.);

• Estimated total grant aid;

• Estimated net price;

• Percent of the cohort (full-time, first-time) that received grant aid; and

• Caveats and disclaimers, as indicated in the HEOA.

CUSTOMIZATION: Why Customize?

Although there are many reasons why an institution might choose to forgo the Department’s template, the following are frequently cited:

• Varying Costs of Attendance• Multiple Room & Board Costs

• Differential pricing by program

• Awarding of Merit-Based Grant Aid• Tangible Factors

• Intangible Factors

• Enrollment Management Strategy• Recruitment of “Institutional Priorities”

• Competition with peer institutions

CUSTOMIZATION: From A Student & Family Perspective

In order for NPCs to be useful to students and parents they need to be accurate and comparable.

Customization…• Increases the potential for accuracy Enables institutions to create NPCs that approximate the dollar amounts students will see on their financial award letter, as much as practicable.

• Threatens the prospect of comparability With each institution free to design their NPC as they see fit, there is no way for students and families to ensure that college A’s NPC operates under the same assumptions as College B’s.

ACSFA HEARING: Overview

• March 17, 2011 in Washington, DC• Morning session devoted to net price calculators

• Objective: Receive input from the community on whether net price calculators are meeting their legislative intent, as a tool for students and families

• Invited both researchers/policy analysts and practitioners to testify before the Advisory Committee

• The transcript of the hearing will be used in upcoming report, to be released by this summer.

ACSFA HEARING: Panelists

Panel One: Analysts

Mark Kantrowitz - FinAid.org & Fastweb.com, Publisher

Sandy Baum - Independent Higher Education Policy Analyst

Diane Cheng - The Institute for College Access & Success, Research Associate

Lucie Lapovsky - Lapovsky Consulting, Principal

Elise Miller - Postsecondary Education Institutional Studies and NCES Program Director

Panel Two: Practitioners

Thomas Babel - DeVry Inc., VP of Regulatory Affairs,

Youlonda Copeland-Morgan - Syracuse University, Associate VP for Enrollment Management

Dan Davenport - University of Idaho, Director of Student Financial Aid

Melissa Gregory - Montgomery College (Maryland) , Director of Student Financial Aid Dan Mann - University of Illinois Urbana-Champaign, Director of Student Financial Aid

Mary Sapp - University of Miami, Assistant VP of Planning, IR & Assessment

ACSFA HEARING: Issue Areas & Questions

1. Student and Family Needs: What data do students and parents need about college expenses and financial aid, and when? 

• In middle school?• During the college search process and before applying for admission?• After admission to one or more colleges?

2. Financial Aid Award Letters: What lessons can be drawn from the history and current status of financial aid award letters? 

• In practice, do financial aid award letters meet the needs of students and parents?• If not, what are the major shortcomings -- from a student and parent perspective?• What improvements can be made and are these improvements likely to be made?

ACSFA HEARING: Issue Areas & Questions

3. Issues Associated with Net Price Calculators: Will net price calculators provide students and parents the data needed to make informed decisions? 

• How do net price calculators relate to financial aid award letters – in content and form?• Will net price calculators likely suffer from the same shortcomings as do financial aid award letters?• Are net price calculators likely to suffer from additional (unique) shortcomings?

 

4. Integration and Standardization: To what extent can financial aid award letters and net price calculators be standardized and integrated? 

• In practice, how closely related are net price calculators and financial aid award letters likely to be?• What steps might be taken to ensure that these two tools are standardized and integrated?• Who should take the lead in doing so and how should that process proceed?

 

ACSFA HEARING: Panelists’ Theme #1

Students and parents need accurate and timely information about both college

expenses and financial aid from middle school through college enrollment.

• Net price is a significant factor in deciding to which institutions a student might apply

• It is an even more significant factor in deciding where a student will ultimately enroll

 

The current status of financial aid award letters – in particular, the lack of comparability

between institutions – provides a cautionary tale for the future of net price calculators.

• Without existing standards for their content, form and organization, financial aid award letters exist in many varieties and styles

• They provide an example of how a lack of uniformity can breed confusion & complexity for students and families

ACSFA HEARING: Panelists’ Theme #2

ACSFA HEARING: Panelists’ Theme #3

While net price calculators have the potential to serve as useful tools for students and

parents, they are likely to suffer from several drawbacks that warrant further examination.

• The potential impact of NPCs is enormous, especially on young students, low-income students and transfer students.

• However, in addition to being difficult to compare, NPCs:• Do not capture value

• Are unlikely to be used by the students and families who could benefit most from them

ACSFA HEARING: Panelists’ Theme #4

Since legislation or regulation is unlikely to ensure that either tool meets the needs of

students and parents, the higher education community must develop guidelines for their

design and use.

• Effort by a broad coalition of higher education representatives is needed to develop best practices for the design and use of both financial aid award letters and net price calculators.

• Some standardization and integration is both possible and desirable

QUESTIONS?