Consumers today have more tools that ever to help decipher college prices, and the financial aid packages that may be offered by those schools. College websites are required by law to have net-price calculators, to help applicants estimate what they will really be required to pay, rather than relying on inflated “sticker prices”. And the federal government’s own College Navigator provides information on each institution, including costs.

Yet despite these improvements to the financial aid application process, many parents and students acknowledge continued confusion about how colleges define important terms like “need”, “aid” or “need-blind admission”. In addition, the price calculators vary in thoroughness, ease of use, and even accuracy, and most colleges do not use the Obama administration’s recently introduced shopping sheet, which is voluntary. So the tools should not only be better, but awareness of their availability should also be increased.

The Department of Education uses the Free Application for Federal Student Aid (or FAFSA) to determine how much a family should be able to contribute to the cost of college, using the income, assets and expenses that a family reports. That, in turn, determines whether a student qualifies for low-income federal programs like Pell grants and subsidized student loans. But most consumers do not realize that colleges are free to come up with their own ways of defining a family’s ability to pay.

Most colleges stick largely to the FAFSA formula. But hundreds of private colleges require another form, the CSS/Financial Aid Profile, and use a related formula created by the College Board (the non-profit organization that administers the SAT and Advanced Placement tests). Many colleges blend the FAFSA and College Board methods, modifying them as they wish, or simply add their own factors to the mix. The result is that comparable colleges can reach very different conclusions, and they do not make those formulas public.

An analysis of government data available online provides some insight into what colleges are demanding. Parents making about $60,000, a little above the national median, are often expected to pay more than 20% of earnings. A family making between $100,000 and $200,000 may often be expected to contribute nearly half of each additional dollar it earns.

Colleges typically want, in addition to a share of parents’ incomes, about 5% of the value of their assets, plus 20-25% of the students’. But there are differences in how colleges define assets. Cornell, Stanford, Columbia and Duke, for example, take into account the parents’ home equity. Harvard and Princeton do not, and neither does the FAFSA formula. Residents of New York state might prefer one of the elite private colleges, since nearly all of them consider regional variations in the cost of living.

Exact comparisons among colleges are impossible, but the government’s database and net-price calculators can provide a rough estimate. Even within the select group of highly competitive elite colleges – with similar tuition and a commitment to meet a student’s full financial need – what families pay varies widely. The database shows, for example, that for freshmen starting college in 2011, families earning $48,000 or less paid, on average, less than $5,000 a year at Harvard, Duke, Caltech and MIT, but more than three times that much at Boston College, Southern California and Washington & Lee. For families in the $75,000 to $110,000 income bracket, Harvard families averaged less than $12,000; Northwestern, Oberlin and Tufts required more than double that. The wealthiest colleges are generally the most generous; Princeton, Harvard, Yale, Columbia and Stanford give need-based aid to families making more than $200,000.

Since the 2008-09 recession, the list of colleges that have eliminated need-blind admissions has grown longer. Many schools now no longer make all of their admissions decisions without looking at financial information, and a family’s ability to pay. The change is no surprise, in light of the mounting financial pressures colleges are facing. Their expenses continue to rise, and many endowments remain below pre-recession levels. And with unemployment remaining high and household incomes stagnant, their applicants require more and more financial aid – in some cases 25-30% more than just a few years ago.

Perhaps most misunderstood is the term “financial aid” itself. A need-based offer might include a Pell grant (capped at $5,645 this year), a grant directly from the college, a federal work-study job and various loans.

To add to the confusion, colleges and the government label some federally subsidized loans as aid, but not others, and not private borrowing. In addition, income from a part-time work-study job found for a student by their college can be counted as aid.

You can read the entire April 9, 2014 article in the New York Times here.