How to Calculate Your Estimated Out-of-Pocket Costs
By Dr. Danielle Kish
When deciding on a college, the cost may be a primary factor for many students and parents. While examining long-term expectations, understanding the cost of attendance, financial aid, and out-of-pocket costs may seem daunting. Questions may emerge regarding what is included in the cost of attendance. What financial aid offers will be extended? Are there scholarships or grants you may be eligible for? How much will I have to pay out-of-pocket? These are just a few financial questions that may arise when considering where to attend college.
The College Prep Series (both the Blog and Vlog series on YouTube) is dedicated to helping address questions and concerns when considering where to attend college. This week, we are looking at the costs of attendance. One tool you may not be familiar with is the Net Price Calculator, also called NPC. This calculator was created to help students and their parents work through some of these questions and provide estimates to assist with your financial decisions about the cost of college. As with most topics in the College Prep Series, sharing the information begins with research. So, let’s start at the beginning and explain why the NPC exists.
In 2011, the Higher Education Act of 1965 (HEA) was amended, and one of the outcomes stated that any higher education institution (HEI) that participates in Title IV aid programs and enrolls first-time, full-time degree or degree-seeking students must have the NPC on their website. An HEI is a postsecondary institution, including (not all inclusively) a college, university, trade school, technology school, or cosmetology school. Title IV aid programs mean that an HEI participates and receives federal student aid. Therefore, if a student completes the FAFSA (Free Application for Federal Student Aid) and accepts a federal student loan, grant, or any offer of federal funding, the student will be eligible to use this funding at an HEI that accepts Title IV federal funding aid. This is excellent news for students hoping to use federal financial aid and want to verify their cost of attendance and out-of-pocket costs.
**Before I move into the purpose of the NPC and how this tool will help you with financial expectations, I want to remind everyone that the NPC provides at ESTIMATE. The numbers you identify when using the NPC are not set in stone and may differ upon admittance. The goal of the NPC is to help you understand and gain an idea of what the costs will be like. The funding expectations can change based on your federal financial aid eligibility, and you, the student, also have the ability NOT to accept all forms of federal financial aid offered. So, remember that this provides ESTIMATES, not the final cost expectation. **
Now that we understand a little bit more about why the NPC is available, what is the purpose of the NPC? The NPC allows students to enter information about themselves and the HEI to understand what the cost of attendance may be and what your out-of-pocket costs may look like. The NPC will ask questions about the student's family, location, income, and financial situation and use this to identify the likelihood of federal funding options (federal student loans, grants, etc.). The NPC also calculates the likely cost of attendance (including tuition, room & board, and other expenses). Finally, the NPC will show the student (and likely parents) these estimated numbers. The NPC will subtract the potential funding options from the cost of attendance, leaving the student (and parents) with an estimated net cost or the student's out-of-pocket cost. Here is an example of what you may see (based on an NPC at a University):
Costs of Attendance | |
Tuition & Fees | $12,000 |
Books & Supplies | $1,500 |
Room & Board | $10,000 |
Extra Expenses | $4,000 |
Total | $27,500 |
| |
Estimated Grants & Scholarships | |
Federal Grants | |
Pell Grant | $5,000 (not the max) |
FSEOG | $1,000 |
HEI Specific Grants & Scholarships | |
HEI Scholarship | $2,000 |
HEI Need-Based Grant Offered | $4,000 |
Total | $12,000 |
| |
Estimated Eligibility for Additional Federal Financial Aid | |
Loans | |
Direct Subsidized Loans | $4,000 |
Direct Unsubsidized Loans | $6,5000 |
Total | $10,000 |
| |
Your Estimated Out-of-Pocket Costs | |
Cost of Attendance Estimate | $27,500 |
Grants & Scholarships | -$12,000 |
Student Loans | -$10,5000 |
Total Estimated Out-of-Pocket Cost | $5,000 |
| |
Remember, this is just an example; I used exact numbers; therefore, this does not reflect a specific school or student. However, the opportunities for funding options are genuine. These are just some of the funding options. Students may also consider work-study and many HEIs offer other scholarships, scholar programs, or funding options to further assist with the out-of-pocket costs.
Hopefully, you can see that the NPC can be an excellent tool for understanding the costs associated with a specific HEI. There is one drawback right now: the 2024-25 FAFSA (if you recall from the previous Vlog) is being released in December; this usually occurs in October. For this reason, the NPC cannot be updated with the new funding limits for federal loans and grants. This is a setback, but you can still gain an understanding of funding with the 2023-24 FAFSA information. This is just another reminder that the NPC is not set in stone and should be used to estimate costs, not expecting it to be 100% accurate.
The NPC is a great tool to assist you in comparing the HEIs that you are considering. Make a list of all your schools, then use the NPC for estimated costs, and you have a side-by-side comparison. The NPC takes little time to fill out to get such valuable information. When using the NPC, remember that these are the estimates for one year; future years may look different. You may have different financial aid offerings; in your first year, there may be first-year grants or scholarships you will not have access to in the future. It is important to remember that this is an estimate for one year, and you should speak with your HEI to identify if there are federal funding options you will not be eligible for in the future. Also, remember that the HEI probably does not know if the cost of attendance will change.
Also, remember that scholarships and grants (for the most part) do not have to be repaid. If you receive a scholarship or grant and successfully pass your classes, you should not have to repay these funding options. Student loans, yes, you do have to pay them back. Remember that these federal financial loans also have interest accruing, some upon accepting the loan, and some start accruing after you leave school. So, make sure you are keeping an eye on these. Visit the QAResources page on www.qar101.com to learn more about the differences. You can also visit the Webinar page for webinars about funding and financial aid.
The NPC is just one tool to look at when deciding where to apply and possibly attend. The NPC is a quick tool that will help you identify the cost of attendance and possible funding options you may have yet to realized. I still remember when I was at ASU, I filled out the FAFSA, and when my funding options came in, there were state grants I was eligible for! I had no idea and was very excited. Yes, this was before the NPC calculator had been established. You only know what is available to you in your journey to college life once you apply. One final reminder…the FAFSA is the FREE Application for Federal Student Aid. Yes, this is FREE to fill out, so if you come across a page telling you that you must pay to apply…you are on the wrong page! You can find the link for FAFSA on the QAResources page!
You probably notice that I am a huge fan of parental involvement to help ensure you make the right decision. Let your parents help you find the best options for today and the long term 😊
Until next time… Never give up! If you want to succeed, you may need to give it ONE MORE TRY! You can do it!
References
Net Price Calculator
Search for YOUR School’s Net Price Calculator at the U.S. Department of Education:
Articles
U.S. Department of Education (USDE). NetPriceCalculatorQuickStartGuide (ed.gov)
National Center for Education Statistics. Average Institutional Net Price FAQs (ed.gov)
Additional Resources:
Dr. Danielle Kish struggled with her college journey, costing her time and money. Danielle’s hard work and research paid off, and she completed her doctorate in education. She is dedicated to helping students and families overcome obstacles, identifying the right questions to ask, and assisting in where to find the answers. Dr. Dani continues to focus on improving student success in the classroom through research, conference engagements, and publications. To read ‘The Full Story,’ visit the ABOUT page at College Questions, www.qar101.com.
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