|POCS Reality:||Before attending college, it is important to accurately calculate your out-of-pocket costs.|
How did the dream of comparing college costs turn into a nightmare of confusion?
The Day Dream
Prospective students and their parents could learn their college costs before attending, so they wouldn’t get in over their heads in debt..
A new federal law (Higher Education Opportunity Act of 2009 (see HEOA Sec. 111 which amended HEA Title I, Part C: added HEA Sec. 132(a), Sec. 132(h) (20 U.S.C. 1015a(a), 20 U.S.C. 1015a(h))) requires colleges to include a Net Price Calculator (NPC) on their website by October 29, 2011.
The basic Net Price Calculation is:
Price of attendance – estimated financial aid = out-of-pocket college costs.
Although October 29th has not yet arrived, many schools have already added an NPC. The problem is both the calculator and the calculations are so flawed that college cost comparisons are difficult at best.
- No uniform calculator exists and colleges using some general guidelines are free to design their own NPC or contract with a business to develop one for them. That means students and parents will be college cost comparing apples to oranges.
- Price of Attendance is underestimated and always will be until a college’s cost of attendance formula (COA) includes a family’s huge hidden extra expenses. I call this formula the POCS COA.
- Financial aid estimates are inaccurate for two reasons. First, because the real calculation will be based on a complicated formula applied to the 100+ questions students and parents must answer on the federal financial aid form FAFSA. Some schools may also require additional forms regarding awards from institutional funds. Second, because not all financial aid reduces the college bill but are ways to pay the college bill. Only free money grants and scholarships lower college expenses. Federal education loans have borrowing costs that raise the college costs they are being used to help pay, but this fact is not mentioned. Don’t get me started on the Federal Work Study (FWS) Program. Here, students, not the college, receive a paycheck as they work in their FWS job. I think of this award (often $1000-$2,000 for the year) more like pizza and latte money.
The POCSmom’s DIY College Prep Insight and Stress-busting tip
I love the idea of families calculating their college costs and having a plan for how to pay them. College is supposed to help not hinder a family’s finances, so think about colleges you can afford either from cash on hand (savings, checking, stocks, bonds, mutual funds, education savings plans) and/or what you can afford to borrow (based on repayment and projected future income).
For more college-bound information and myth-busting tips, consider POCSmom’s advice for the college-bound:
Don’t let sky rocketing college costs and shrinking financial aid plunge your family into a deep hole of educational loan debt. Escape the Net Price Calculator nightmare and start living your college dreams.
*POCS: Parent Of a College Student