Avoid the Sticker Price. It’s All About the Net Price During Financial Aid Offer Season.

It’s inevitable. At some point during the financial aid offer season, the critical period where financial aid offices nationwide frantically produce financial aid offers to incoming first-year students to educate them on their prospective costs and financial aid package, a student or parent will quip about how much scholarship assistance they or their child, respectively, is receiving to attend a school. At the surface, significant scholarships will make anyone smile and shout for joy. However, it is all about the net cost at the end of the day, not the sticker price.

Think about this statement: a large scholarship package does not matter if the bottom-line cost to attend that school is significantly higher than a similar school with a reduced financial aid package but lower overall costs. To make informed choices, compare the net costs of these schools, not just the scholarship amounts. This helps families avoid surprises and select the most affordable option.

Sticker price is the total advertised price before any discounts. Like any other purchase in life, a college or university’s sticker price is simply tuition, fees, room, and board before financial aid kicks in. Some schools advertise a high starting cost, while others are more modest. While there is a psychological factor to pricing decisions in higher education, it should not be your first inclination to stop researching a school because it has a high or low starting cost. Instead, you should file that information away in the back of your head and revisit it during your review of college options.

When reviewing your financial aid offer, start with your total cost of attendance. Then move down to the “discounts” section of the financial assistance offer. This section of the financial aid offer should highlight the gift aid available to you as a student. Gift aid does not require repayment. Examples of gift aid include scholarships and grants from several sources: federal government, state governments, institutions, donors, and private entities. Always subtract any gift aid you are eligible for before reviewing loan assistance. Sometimes, it’s surprising to see how low your net cost is before any other forms of financing.
Your net cost (also referred to as net price) is the amount owed after applying free sources of financial aid to your starting costs. Recognizing this can help you feel more confident and in control of your college choices, rather than overwhelmed by the numbers. Remember: you selected this school as an option; you should not solely eliminate one school or another simply because it is cheaper or more expensive to attend.

Here’s a classic illusion trap too many people fall for when selecting a college: A school offers a $40,000 scholarship to cut the price of an education from $80,000 to $40,000. Another school provides a more modest scholarship of $15,000, reducing a student’s cost from $40,000 to $25,000. What’s the difference between the two schools? While the first school offers a generous and attractive scholarship package of $40,000, it’s still more expensive than the second school, which provides a more modest scholarship package of $15,000.

While students value scholarships, they should focus most on net price. If cost is not a significant concern to you in the college selection process, then comparing financial aid offers will not likely yield any new information when making the final decision. Price-conscious students will need to rely on their financial aid offers to make the best decision within their financial constraints.

Another factor to consider is the terms and conditions of the scholarships offered to you. Are the renewal requirements achievable? Even the most prolific high achievers tend to regress a bit in college as they adjust to a new environment. If the renewal requirements are too strenuous for you to handle, you may experience an additional sticker shock the following year after the financial aid office revokes your existing scholarships. Trust that understanding these details will help you make a more secure and informed decision.

Not all scholarships are renewable. An age-old practice that some schools still follow is front-loading scholarships during the student’s first year. Basically, all scholarships for students at some institutions are non-renewable after the first year. It is the student’s responsibility to find additional aid to cover the significant increase in costs in the years ahead. Read all scholarship letters to understand the terms and conditions. If you have questions about the scholarship parameters, chat with a financial aid representative to clarify any concerns.

As the financial aid offer season rapidly approaches, now is the time to feel prepared and empowered to make a logical decision. While an attractive scholarship package is intriguing to consider, it’s better to focus on net prices. Removing costs from the equation can help you avoid regret and make a confident choice, knowing you’ve considered all variables carefully.