The 6 Key Terms for the Real Cost of College

Paying for college can feel overwhelming, especially when you’re faced with a maze of financial aid terms, acronyms, and formulas. Whether you’re a parent trying to plan ahead or a student preparing for the next big step, understanding the language of college costs is essential. In this post, we’ll break down six key terms that determine both how much you’ll actually pay and how much help you may receive.

Once you understand these concepts, the financial aid process becomes far more manageable and much less intimidating.

1. SAI — Student Aid Index

The first term is SAI. That’s an acronym that stands for student aid index. And that’s how much the government and a college think that you can afford for a year of college.

That includes parent and student assets as well as parent and student income. There’s all kinds of percentages and tables and graduated scales that determine this.

2. COA — Cost of Attendance

The next term is COA. That stands for cost of attendance. Every college has an official federally recognized cost of attendance.

That includes a combination of direct costs that you pay to the college (tuition, fees, room and board) as well as indirect expenses that you may not have considered. Things like books, school supplies, living expenses, travel expenses, and some amount of student loan interest all fall under this category, and those hidden costs increase at about 3 to 5% a year.

3. Need

The next term is need. Need is an equation where we’re going to take your COA (“what does it cost to go to this college?”) and subtract from it your SAI (the amount they think you can afford).

The difference between those two numbers, if it’s a positive number, is your “need.” That’s how much money you need to make this education more affordable. If your SAI (student aid index, i.e. what you can afford) is greater than the COA (cost of attendance) you don’t have need.

If you don’t have “need,” you won’t be able to engage with our next most important term.

4. Gift Aid

Gift aid is free money that does not need to be repaid. That comes in the form of need-based grants and merit-based scholarships. Free money is the best kind and colleges call it “gift aid.”

5. Gap

The next term is gap. Gap is another equation wherein your need is subtracted from your gift aid.

To recaps: what it costs to go to a given college minus the portion you can afford is your need.

When you have your need, you then subtract the gift aid you receive.

The difference that is left over is your “gap.”

But what do you do if you have “gap”?

You have three options:

• Negotiate. There are ways to get colleges to either increase the amount of merit scholarship a student is getting or appeal the financial aid decision to get more need-based grants/gift aid.
• Pick a more affordable college that is more committed to meeting more of your need with gift aid.
• Loans. Loans cover gap. From student loans to parent loans to federal and state and private loans, there are a great many to choose from. However, if the first two options are (for whatever reason) unavailable, we must consider loans to cover gap.

6. NPC — Net Price Calculator

The sixth and perhaps most important term when it comes to the real cost of college is NPC, or net price calculator. Just about every college has one specific to their institution.

With that being said, it’s less relevant what the “sticker price” of a college is because it will almost always be different from what they’re actually going to charge a family of your standing, no matter what that standing might be.

You’ll head to a given college’s website, find the net price calculator (Google it if you have to), input things like your income and your assets, and it’s going to spit out an estimate (not a guarantee!) of what this college should cost you.

The NPC will help you to consider whether or not your family can afford a given college before deciding to allow your student to apply to that college.

All in all, there’s a lot to know. However, you can always reach out to us by calling 732-556-8220 or emailing Questions@SolutionPrep.com.

We’re always here to help!