Net Price: The Real Story - COLLEGEdata - Pay Your Way

Net Price: The Real Story

What will a college really cost you? Knowing your net price is the key to making an affordable college choice.

Even with a financial aid offer in hand, it can be difficult to figure out just what your actual college cost will be. Here's how to arrive at the truth.

What They Say You Should Pay for College

Uncle Sam determines what you and your family should pay for the upcoming year. This amount is called your Expected Family Contribution (EFC). It is based on the information you provide in your Free Application for Federal Student Aid (FAFSA).

The college determines your "financial need." To figure your need for financial aid, a college subtracts your EFC from its official cost of attendance (COA).

Your Financial Need = COA minus EFC

What You Actually Pay for College

A college may not fully meet your financial need. The sad truth is that most colleges don't have the financial resources to fully meet the need of every student.

Not all aid reduces college cost. Most financial aid awards are a combination of "gift aid" (scholarships and grants) and "self help aid" (loans and work-study). Only gift aid reduces college cost. You must pay back the self-help aid, either by repaying your loans or by working at a work-study job.

Your true out-of-pocket cost, or "net price," comes from three sources: your EFC, self-help aid, and unmet financial need. In other words, you pay for all college costs not covered by gift aid.

Net Price = EFC + Self-Help Aid + Unmet Financial Need

Using Net Price to Compare Awards from Similarly Priced Colleges

See which college has a lower net price. Let's say the COA for an academic year at two different public colleges is $15,000. Your EFC has been calculated as $2,000, so your financial need is $13,000. College A offers you a total award of $8,000. College B offers only $7,000. It seems like College A offers the better deal, but look at how the aid package breaks down:

Which college is the better deal?
  COA EFC Self-Help Aid Gift Aid Unmet Need Net Price
College A $15,000 $2,000 $4,000 $4,000 $5,000 $11,000
College B $15,000 $2,000 $2,000 $5,000 $6,000 $10,000

College A gives you only $4,000 in gift aid. College B gives you $5,000 in gift aid. That means your net price at College B would be $1,000 lower than at College A.

Using Net Price to Compare Awards from Differently Priced Colleges

See how close two net prices are. Now let's say your EFC is $2,000. The COA at a public College C is $15,000. The COA at a private College D, is $30,000. College C offers you a total award of $9,000. College D offers you a total award of $24,000. Yet both colleges could have the same net price.

Which college is the better deal?
  COA EFC Self-Help Aid Gift Aid Unmet Need Net Price
College C $15,000 $2,000 $4,000 $5,000 $4,000 $10,000
College D $30,000 $2,000 $4,000 $20,000 $4,000 $10,000

If the gift aid from private College D was above $20,000, its net price would be lower than public College C's. Believe it or not, this scenario is not uncommon.

What's Next?

Note: Financial information provided on this site is of a general nature and may not apply to your situation. Contact a financial or tax advisor before acting on such information.

For Students Age 18 and Older

Have you received a Personal Invitation to apply for a Student Credit card?

Learn how to qualify for a Personal Invitation to apply for a Student Credit Card

1st Financial Bank believes students who pick colleges wisely will also want to learn how to use credit cards wisely.

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