Each of these sellers posts a “sticker” price that might bear no resemblance to the final price that the customer pays at the end of the day.
This is something that every aspiring student, and every parent of every aspiring student in the United States of America must understand.
The good news is that the aspiring student stands to pay a lot less than the advertised price for his or her education. They just have to be aware of how the game is played.
Like most red-blooded North American men, I love the experience of driving a brand new car. But I really – I stress really - dislike the buying process. I am aware that there will be a difference between the list price that the car dealerships generally advertise, and the final price that I will pay, but I am never particularly confident that I am getting the best “deal” possible. I am always suspicious that the salesperson is holding something back. And that is not a trust-based, transparent transaction that I favor either in business or in my personal life.
So the “sticker price” versus “net price” gap sours what should otherwise be an enjoyable purchasing experience.
For this Canadian, it came as a surprise to me that this practice was alive and well in the US College Tuition pricing system.
Of course, being a University graduate myself, I have always been aware of scholarships, grants and bursaries that can act to defray the cost of education. But when I read the article published on npr.com last week I was drawn to the level of sophistication with which these prices are managed, as well as the magnitude of the differences between gross and net prices. In fact, the following article will show that while the inflationary trend over the past 15 years in sticker prices of US College tuition is obvious, the trend in average net prices paid, at the end of the day, is considerably different.
In fact, average net prices paid by students for tuition in US private colleges has actually declined in the past five years, and is flat to ten years ago!
Jacob Goldstein explains the difference for the Planet Money section of npr.com:
Here are two ways to think about the price of college tuition:
1. Sticker price is the full price colleges list in their brochures and on their websites.
2. Net price is the price students actually pay. Net price accounts for the fact that many students receive grants or scholarships. So it can be considerably lower than sticker price.
Quick example. Say you go to a school where the sticker price is $25,000 a year. You get a $10,000-a-year grant. The net price for you — the part you have to pay for through loans, work and family contributions — is $15,000 a year.
Here’s the average sticker price and average net price for tuition and fees at public and private colleges in the U.S. over the past 15 years:
Prices do not include room and board. Numbers are adjusted for inflation in constant 2011 dollars.
Source: College Board
The Institute of Education Sciences of The National Center for Education Statistics published some valuable information about the requirement to post a net price calculator on its website that uses institutional data to provide estimated net price information to current and prospective students and their families based on a student’s individual circumstances. This is in accordance with the Higher Education Opportunity Act of 2008 (HEOA), which set a deadline of October 29, 2011 for institutions to include such a calculator.
Details regarding the Net Price Calculator Requirement, along with FAQ’s on this matter, may be accessed by clicking here…
The College Board
There is some excellent information available to every student and parents of a student with regard to tuition fees. A report titled Trends in College Pricing has been produced by the College Board. The College Board is a not-for-profit organization whose mission is to “connect students to college success and opportunity.”
The Trends in College Education report ought to be required reading for aspiring students and parents. It may be accessed by clicking here, and is available in a variety of formats including PDF. While it focuses on “macro” level information, it provides some very valuable information about what average students are paying.
One terrific graphic within the report helps students and parent budget for a college education, and reveals a typical breakdown of tuition fees, books, transportation, food, and lodging that are the major components of overall expenses.
Here is an Overview of the report, as presented by the College Board:
Trends in College Pricing provides information on changes over time in undergraduate tuition and fees, room and board, and other estimated expenses related to attending colleges and universities. The report, which includes data through 2011-12 from the College Board’s Annual Survey of Colleges, reveals the wide variation in prices charged by institutions of different types and in different parts of the country. Of particular importance is the focus on the net prices students actually pay after taking grant aid into consideration. Because of the important role of grant aid, these net prices have not followed the same sharp upward path as the published prices. Data on institutional revenues and expenditures and on changing enrollment patterns over time supplement the data on prices to provide a clearer picture of the circumstances of students and the institutions in which they study.
Report findings are organized into the following categories:
- PUBLISHED PRICES. Published prices are the tuition, fee, and room and board charges postsecondary institutions post. They are sometimes called “sticker prices.” Students pay these prices if they do not receive any financial aid. Many students receive discounts from the institution, as well as grant aid from other sources that helps them pay the published prices.
- VARIATION IN PUBLISHED PRICES. Tuition and fees vary considerably between public and private institutions, between two-year and four-year institutions, across states and regions, and by the types of degrees offered. There is also a wide range of prices within each of these categories.
- NET PRICE. Net price is the published price minus the grant aid — and sometimes the tax credits and deductions — that students receive. Net prices are frequently much lower than published prices and represent the amount students actually pay.
- INSTITUTIONAL FINANCES. Colleges and universities get their revenue from a variety of sources in addition to tuition and fees. These include state and local appropriations for higher education, income from endowments and annual giving, research grants, and hospitals and other enterprises. The paths of these revenue sources, combined with institutional expenditures on salaries and benefits, student support services, administration and other operations help to explain rising college prices.
- ENROLLMENT AND INCOME. The distribution of students across types of institutions has varied over time, as has the percentage of students who enroll full-time. Students study a variety of fields, take some courses on-line, and earn different types of degrees and certificates. The incomes of families in the United States have grown unevenly in recent years. These income patterns help to explain post-secondary enrollment patterns. (Read more…)
The College Board’s national office is located in New York City, and they have main offices in Reston, Virginia, and Washington, D.C.. Six regional offices are located throughout the United States. See their web site for details.
Transparency in major investments such as education is vital. The calculator helps to improve this significantly.
Your thoughts and feedback are appreciated.
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