Post-secondary institutions post a Cost of Attendance or Price of Attendance, also known as a "sticker price." However, that price is not how much an institution will cost an individual student. To make higher education costs more transparent before a student actually applies to college, federal law requires all post-secondary institutions receiving Title IV funds (federal funds for student aid) to post net price calculators on their websites by October 29, 2011.
As defined in The Higher Education Opportunity Act of 2008, the net price calculator's purpose is:
"…to help current and prospective students, families, and other consumers estimate the individual net price of an institution of higher education for a student. The net price calculator shall be developed in a manner that enables current and prospective students, families, and consumers to determine an estimate of a current or prospective student's individual net price at a particular institution."
The law defines estimated net price as the difference between an institution's average total Price of Attendance (the sum of tuition and fees, room and board, books and supplies, and other expenses including personal expenses and transportation for a first-time, full-time undergraduate students who receive aid) and the institution's median need- and merit-based grant aid awarded.
Elise Miller, program director for the U.S. Department of Education's Integrated Postsecondary Education Data System (IPEDS) stated the idea behind the requirement: "We just want to break down the myth of sticker price and get beyond it. This is to give students some indication that they will not necessarily be paying that full price."
The template was developed based on the suggestions of an IPEDS' Technical Review Panel (TRP), which met on January 27-28, 2009, and included 58 individuals representing federal and state governments, post-secondary institutions from all sectors, association representatives, and template contractors. Mary Sapp, Ph.D., assistant vice president for planning and institutional research at the University of Miami, served as the panel's chair. She described the mandate's goal as "to provide prospective and current undergraduate students with some insight into the difference between an institution's sticker price and the price they will end up paying."
To meet the requirement, post-secondary institutions may choose between a basic template developed by the U.S. Department of Education or an alternative net price calculator that offers at least the minimum elements the law requires. A recent report issued by the Institute for College Access and Success, ""Adding it all up 2012: are net price calculators easy to find, use and compare?", found key issues with the implementation of the net price calculator requirement. In "Adding it all up," the authors state, "this report takes a more in-depth look at the net price calculators from 50 randomly selected colleges. While we found some positive practices that were not evident at the time of our previous report, net price calculators are still not reliably easy for prospective college students and their families to find, use, and compare".
After the requirement came into effect, the free website CollegeAbacus.org began creating a system that would allow students to enter the personal information once, and then use and compare net-prices of multiple schools. The Gates Foundation's College Knowledge Challenge announced College Abacus as one its winners in January 2013; the $100,000 grant from the Gates Foundation will enable College Abacus to expand from its beta version with 2500+ schools to a fully comprehensive version with all the colleges and universities in the United States.