Understanding Net Price

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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, or 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, will be affected by the college’s financial aid policies that determine the percentage of need they will meet, and it’s 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 (usually because of grades and test scores but also because of institutional desires that might include geographic or ethnic diversity, interest in specific majors, or special skills and aptitudes of the applicant), they will offer grants to make up a larger percentage of the difference between need and COA.

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 third component, or GAP, is the amount of need that is unmet. GAP may be paid from family assets, income, or parental loans.

To reduce your net price, include colleges that meet a high percentage of established need and those that are generous with merit aid. 

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. Therefore, by carefully including colleges on your list that offer generous merit aid and where you will be a top applicant, you can greatly reduce the net price you will pay for education.

Prepared especially for our clients and their families. The information included in this newsletter is general and does not constitute educational, financial, accounting, legal, or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on the material contained herein. Copyright © 2017 by The College Advisor, Inc. All rights reserved. 

Apella Capital, LLC (“Apella”), is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, or excluded or exempted from registration requirements. Apella provides this communication as a matter of general information. Any data or statistics quoted are from sources believed to be reliable but cannot be guaranteed or warranted. Apella does not provide tax or legal advice and nothing either stated or implied here should be inferred as providing such advice. No current or future client should assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice. As with any investment strategy, there is the possibility of profitability as well as loss.


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