Sunday, August 21, 2011

Online College Calculators - Close Enough for Government Work

Online College Calculators - Close Enough for Government Work

SmartMoney asks the question: Do Online College Calculators Reveal True Costs?

... What's more troubling, critics say, is that some schools have made their net figures look better by subtracting loans from the cost, when ultimately, of course, they are part of the out-of-pocket total. The Institute for College Access & Success tested 16 calculators and found many problems. 

One example: The online calculator of Westminster College, a liberal arts school in Salt Lake City, came up with a net figure of $33,170 after subtracting $6,000 in scholarships, but it also showed a net price of zero after loans and work study. Asher says many families may not realize the bulk of the aid is coming from loans. But Sean View, Westminster College director of financial aid, says the school's calculator clearly marks how much aid comes from loans. "We want to show people how to get the net price down to zero with these financing options," View says." [Emphasis added.]

Net PRICE is not net COST and Student loans do not magically disappear... 

See: College on the Student Loan "Discharge" process. 
COST: outlay or expenditure, amount charged (including maintenance costs)
PRICE: value, worth

Example for consideration: 

4 years college tuition paid in cash $100,000 = $100,000
4 years college paid $25,000 cash and $75,000 loans @ 8% over 10 years = ~$134,000 or as a financing company (aka the US Government) might say: "priceless", certainly risk-less from their point of view. 

Calculation from:

Sean View is looking out for the interest of the school and not for the students or parents. Yes, Universities want you to attend their college, and graduate in four, five or six years. But they are just as interested in your tuition - and government funding is a key input to their budget. 

The Bottom Line:

Schools that do not disclose the full impact of student loans deserve scrutiny of their graduation rates and graduate placement history. 

Is it possible that the US Government is content with very low interest rates on Treasuries, since they have tapped into the jugular of student loan income?