Issue Briefs

About

The NPC requirement was included in the 2008 reauthorization of the Higher Education Act (HEA) (the Higher Education Opportunity Act). The Department of Education published a calculator template in October 2009, and each Title IV institution was required to post an NPC, either the Department's template or a comparable one it develops, on its website by October 29, 2011.

The purpose of NPCs is to provide a customized estimate for a student’s net price. Under the HEA, "net price" is defined for first-time, full-time undergraduate students receiving aid as the cost of attendance minus the average need- and merit-based grant aid from federal, state/local, or institutional sources. Institutions that customize their calculator must include, at minimum, the same input and output elements as the Department's template, though they may use either federal or institutional methodology to approximate the student's expected family contribution.

NAICU views NPCs as an important tool for showing families the cost of a college, and they are especially relevant for private, nonprofit colleges, due to the sector’s tuition discounting model. Despite tuition discounting being a progressive pricing model, it often produces high sticker prices that mask the much lower costs most students actually pay and can cause "sticker shock" that discourages students from exploring their options.

NAICU holds that institutional flexibility in building the calculator is critical to its usefulness because each institution has its own aid policies tied to its resources, mission, and scholarship programs, and many private colleges awarding large amounts of aid have invested significant resources in customized models to give students a more accurate estimate.

Universal Net Price Calculators

Legislation has been introduced calling for a "universal net price calculator" that would let users answer a single short set of questions and receive net price information for every institution at once.

NAICU opposes a universal net price calculator. Colleges' diverse financial aid policies cannot be captured by a single national tool, and certainly not in a timely enough fashion to be relevant to prospective students without significant overhauls to the reporting requirements and timelines placed upon institutions.

In NAICU's view, a universal calculator implemented as proposed would not be much more accurate than current NPCs and would, ultimately, just be another misleading number for students and families to consider as they plan for higher education.

History

Net price calculators originated in the Higher Education Opportunity Act of 2008, the reauthorization of the Higher Education Act, which directed the Secretary of Education to develop a calculator using the law's definition of "net price." The Department of Education published its template calculator on October 29, 2009, and each institution participating in Title IV federal student aid programs was then required to post a net price calculator on its website, either the Department's version or a comparable one of its own, within two years.

Since then, the recurring policy development has been periodic legislative interest in a "universal" net price calculator, including a bipartisan amendment passed during the October 2019 markup of the House's College Affordability Act and a recent House Education and Workforce Committee bill on financial aid award letters that included a universal net price calculator requirement.