What are direct vs. indirect costs? How do I determine net price?

by | May 9, 2024 | 0 comments

by Karli Greenfield, posted in Parent and Family NewsFinancial Aid & Scholarships.

There are very few things in the college preparation process that are as nerve-racking as asking and answering the question, “How much will I have to pay?” Few students are fortunate enough to cover all college costs with grant and scholarship funding, but this fact does not have to deter you from seeking a college that makes sense for your student and your family. When you understand a college’s cost structure and financial aid opportunities, you are far better equipped to navigate the college selection process with confidence. So, let’s dive in:

What are direct vs. indirect costs?

As you begin to understand your student’s cost to attend college, remember that just as financial aid opportunities often vary widely between institutions, cost often does as well. While your student attends college there will be costs paid directly to the institution, and then other unbilled costs that your student will incur.

Direct costs are billed costs that are paid directly to the institution, and typically include your student’s tuition, fees, housing, and meal plan charges.

Indirect costs are student expenses associated with college attendance that are not paid directly to the institution, and may include your student’s books and supplies, travel, living, other bills, etc.

How much will I have to pay?

In order to understand your final net price, it is important to note that you will likely see two different cost listings at various points in the college enrollment process. Financial Aid offices use a federally regulated cost of attendance during the financial aid awarding process, which includes both direct and indirect costs. Later in the college enrollment process, you will receive an itemized billing statement, which includes only direct costs (or billed charges). Let’s define net price:

Net price is the difference between total direct costs (tuition, fees, and other billed charges) minus any financial aid (scholarships, grants, and loans) your student is eligible for.

So, to determine your student’s net price you must attain both your student’s direct costs and financial aid offer for the given billing period or year.

Key Takeaways:

  1. Don’t panic! Almost everyone falls prey to the panic that sets in when we get a “sticker shock”. Instead, gather your student’s cost and financial aid information to determine your net price.
  2. Use institutional resources. Schools that participate in federal funding programs are required to publish a “net price calculator” on their website. While you should not view this resource as an official bill, these calculators provide an incredibly useful tool to get a quick view of possible cost and financial aid opportunities.
  3. Don’t wait. The college preparation process is a blur for many families. Often, the stress that families feel during this time is associated with a lack of knowledge and understanding required to navigate the process with confidence. So, stay engaged with your college counselors, ask questions, and stay on top of Admissions and Financial Aid requirements.
  4. Know your options. Many families require additional options to cover college attendance costs, and that’s ok! Most colleges bill students each semester of college attendance and offer payment plans that provide extended payment opportunities. In other words, you may not have to pay your student’s balance in full up-front. In addition, other funding opportunities, including parent and student loans, may be available through federal, state, and private sources. If you are struggling to cover your student’s costs, reach out to the college’s Admissions or Financial Aid office.

Karli Greenfield is a higher education financial aid and enrollment professional. She holds more than 12 years of experience in financial aid, 11 NASFAA Professional Financial Aid Credentials, and years of active participation on the GA Association of Student Financial AidAdministrators board. She is passionate about working with students and families, and innovating college enrollment processes.

Weil College Advising

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