Are Online College Cost Calculators Flunking the Math?

Are Online College Cost Calculators Flunking the Math?
Are Online College Cost Calculators Flunking the Math?

Oct. 29 is the federal deadline for U.S. colleges to put "net price calculators" on their websites. These tools are supposed to estimate the actual cost of tuition and room and board for a specific student, based on family finances and the school's aid budget. But the most widely adopted calculator is inaccurate -- to the tune of thousands of dollars, experts say.

Previously, students had to apply to a college and then wait for an aid award letter in the spring to find out if they could afford to attend. Those from lower-income families were often too discouraged by some colleges' "sticker prices" to apply at all. Thus the Higher Education Opportunity Act of 2008 mandated the web-based estimators, which will appear on about 6,800 college sites. They're designed to give a ballpark estimate of real college costs in 15 minutes or less.

By one estimate, about a third of colleges have invested in robust, customized tools. (Elite schools have offered them for years.) Many others have posted a free calculator developed by the Department of Education. Critics say that one uses distorted definitions, minimal questions and old data -- resulting in estimates that are thousands of dollars too high or too low.

A study conducted by Student Aid Services, one of a dozen firms that builds custom calculators, ran 145,000 real student profiles through the federal tool. The results were wrong 54% of the time. For example, for one student from a family of five, with two other children in college and parent income of $80,500, the net price estimate came in $5,500 too high.

"Colleges enter all the data to make the calculator work, but it operates with very few questions and there is no algorithm behind the federal template -- it's simple spreadsheets," says Mary Fallon, spokesperson for Student Aid Services. "And the data is two years old."

Mistakes Built in to the Calculations

Fallon's company clearly has a stake in discrediting its main competitor. But other critics have found different problems. For example, the federal calculator defines "net price" as the cost of attendance minus the average institutional/government grant for first-year, full-time students. The "average grant" is calculated as the average among the two-thirds of students receiving grants, not all students, notes Mark Kantrowitz, founder of, a college information website. This understates the real bottom-line cost by more than $2,500, or about 11% on average.

Rice University in Houston tried the federal calculator, a Texas state template and a College Board tool before investing in a custom estimator. "The federal one wasn't giving a real accurate picture of costs," says Anne Walker, director of student financial services. "We spent a lot of time testing formulas to make sure we were getting as close as we could. We know we can never hit it right on the money because there is an art and science to create an aid package." But the tool offers a better ballpark estimate for families who might otherwise be put off by Rice's sticker price of about $43,000 for tuition, room and board, and fees.

Another quirk in the federal calculator: It facilitates the bait-and-switch known as "front-loading." That's when colleges offer more generous aid to first-year students and pull back in subsequent years. It often makes a private institution look cheaper than a state school. Because the calculations are based on data from first-year students, families may use that estimate to price a four-year degree and get caught short later on.

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"Federal loan limits rise as students get into later years, which makes it convenient to shift away from grant aid and toward loan aid," says Zac Bissonnette, author of the book Debt-Free U (and a former columnist for DailyFinance). "That's why many students end up graduating with more debt than they expected."

In addition, the net price definition fails to account for housing choices: Kantrowitz found a difference of up to $6,112 on average for students who live on campus, off campus or with their parents. Also, the federal estimator applies to in-state, full-time applicants only. An out-of-state student who unwittingly uses the tool will find it understates his cost by $11,013 on average; a part-time student will find it overstates the real bottom-line cost by $6,693.

Virginia Tech professor Lefter Daku, who served on the committee that created the calculator, has questioned its accuracy in computing the expected family contribution (EFC) -- or the amount a family can afford to chip in for college costs. The lower the EFC, the more aid a student will receive. The federal tool asks only seven questions to determine EFC, compared to the federal student aid application (FAFSA), which uses 74 different data points.

Going Beyond the Tool

The Department of Education defends the calculator. "We know our model is basic and some schools have gone above and beyond, but we think it will be a helpful tool as a first step," says DOE spokeswoman Sarah Gast.

So what can families do?

1. Look at the number of questions posed by the calculator. "If it's less than 15, you are getting an incorrect estimate," says Fallon. "Around 25, you're getting a rough estimate, and with 30 to 45 questions, you are likely getting an accurate estimate."

2. Once you have the dollar figure, call the college and inquire if the ballpark figure is accurate. "Parents really need to talk to the financial aid offices of the schools they are thinking about sending their son or daughter to," says Walker.

3. Look at the percentage of students who matriculate and actually graduate from the institution. That may give you an idea of whether a school is aggressively front-loading, causing students to drop out or change colleges when their costs rise. (Just keep in mind that other factors may be at work in graduation rates, so ask the schools about them.)

"I think the calculators are helpful, but not especially important, because what you should be thinking about is how to get out of school with no leverage," says Bissonnette. "For nine out of 10 families, an in-state public college is the most affordable way to go to college."