Know the limits of the new college net price calculator

Tomorrow marks the day that colleges and universities across the country must mount "net price calculators" on their Web sites to enable students and their families to get a better idea of their college costs. The calculators, mandated by the Higher Education Opportunity Act of 2008, are designed to estimate the cost of attendance, net of loans and grants.

But these calculators should be seen only as a baseline in determining your final costs, and it's important to understand their limitations. Here are a few points to consider:

• Don't expect the calculators to provide a complete, apples-to-apples cost comparison among colleges. For one, colleges don't all use the same calculator. Some are custom-designed, others are based on a model provided by the U.S. Department of Education. Calculators that require more information are likely to be more accurate than those that require less, says Mark Kantrowitz, publisher of finaid.org, an online source of information on financing college. The University of Vermont's 10-page calculator asks for details on the parent's earnings, the child's GPA, class rank and SAT or ACT scores, among other details. The University of Arizona, in contrast, has just three pages of questions.

• Be aware that the estimates could be outdated. If you're using the calculator now to plan for next fall, you could be looking at figures that are two years old, Kantrowitz says. That's because the costs used in the calculator are based on data gathered in December of each year, while a college's financial-aid budget for the fall semester isn't created until the spring before. So you could be trying to figure out what you'll need for Fall 2012 based on figures from Fall Semester 2010.

• Note the difference between "net price" and "net cost." You may find both in the output of a college's calculator. Colleges are mandated to provide a net price, defined as the price of attendance minus the average institutional or government grant aid for first-year, full-time students. But colleges also might subtract from that figure the value of loans and work-study to provide a "net cost" figure that's significantly lower than the net value, Kantrowitz notes.

Even the definition of "net price" is flawed, he maintains. The average grant aid sum used in the calculators refers to aid given to first-year, full-time students, which may be larger than what's given to upperclassmen and part-time students. So transfer and part-time students who use these calculators may get skewed results that don't approach their real costs, Kantrowitz notes. (He's written a paper on his Web site that describes the problem in more detail.)

"The flaws lead to thousands of dollars of difference in the net price," Kantrowitz says.

Bottom line: While the net price calculators' output may be a good ballpark figure, Kantrowitz says, "it's not sufficient information to distinguish between home plate and center field."

For more on financing college, see "White House announces plan to cut some student loan payments" and "Tax-wise ways to save for college."

—Tobie Stanger