By David Leonhardt
The financial-aid calculators maintained by colleges are a case study in both flawed bureaucracy and flawed customer service. As part of a 2008 higher-education law, Congress required colleges to build the calculators — online tools to let families estimate how much they’d really have to pay to attend a specific college.
The idea was a sound one. Many students and parents assume that attending college costs vastly more than it does, because they focus on the published price for tuition. For middle- and low-income families, the real cost tends to be far lower.
But the calculators are full of problems. Students are often asked to create an account to use one, which discourages many from doing so. And the calculators ask a battery of technical questions, many of which are unnecessary to provide a good estimate. Most of the students and parents who manage to start the calculator don’t even complete the process, research suggests.
In 2013, Wellesley — the women’s liberal arts college outside Boston, alma mater of Hillary Clinton, Madeleine Albright and Nora Ephron, among others — decided to take a different approach.
Led by an economist on the faculty, Phillip Levine, the college created a calculator that was much easier to use. Students didn’t have to create an account first. (Anyone can use it, even families with no plans of applying to Wellesley, which is significant because financial-aid offers at selective colleges are often similar.) The Wellesley calculator asks for only nine pieces of information, like annual income, house value, citizenship status and family structure.
In a paper published by the Brookings Institution on Wednesday, Mr. Levine reports the first year of results from the calculator, and they’re positive. They’re sufficiently good that Mr. Levine’s Brookings paper suggests that Congress consider changing the law to require colleges to simplify their existing calculators. Several senators — including Lamar Alexander and Chuck Grassley, both Republicans, and Michael Bennet and Al Franken, both Democrats — have introduced bills to simplify the financial-aid process.
The most encouraging statistics for the Wellesley calculator involve the completion rate. Among people who began entering information, 80 percent finished doing so and received an estimate — compared with only 30 percent who complete the process with Wellesley’s initial calculator, the one mandated by the 2008 law. The average time to enter the information and receive an estimate was only three minutes. “This statistic highlights the simplicity of the tool,” Mr. Levine notes.
Crucially, surveys conducted by the college show that many low-income families who used the calculator were surprised by how low their effective tuition would be. That’s the biggest goal of the project.
“People focus only on the sticker price,” Mr. Levine told me when the calculator was introduced. “The sticker price is a meaningful statistic for roughly 40 percent of our students. The majority of our students are receiving financial aid, and for them the sticker price is an irrelevant number.”
The sticker price at Wellesley — including tuition, fees, room and board — is close to $60,000. Yet a typical family making $50,000 a year would pay in the neighborhood of $6,000, for example.
The biggest downside to the calculator’s first year is the mix of students using it: Most are still not low- or even middle-income families. The users, according to the Brookings paper, “are more heavily tilted towards higher income financial aid applicants, particularly those with total family incomes between $80,000 and $225,000 and away from those with incomes below $50,000.” That last group, of course, has the most to gain from understanding the truth about financial aid.
One final note: When Wellesley first introduced the calculator, I criticized it for not including estimates of work-study wages or loans. Many students help pay for college by working and taking on debt, and excluding these figures gives an overly rosy view of the cost of college. Fortunately, Wellesley has since changed the calculator to include both.
In the past, the hypothetical family making $50,000 would simply have been told that it would need to pay $4,000 out of pocket. Now, it’s told that it will face a $4,000 direct bill and that the student will need to contribute an additional $2,000 from work-study — for a total of $6,000. (Wellesley would not ask the family to take out any loan, although it could choose to do so to cover part or all of the $6,000.)
The change makes the calculator more honest. At a time when the gap between what college graduates and everyone else earn is at a record high, the numbers still show that a degree from a college like Wellesley is a fabulous bargain for low-income students who manage to be accepted.