Question

When calculating net price, why do you think loans are not deducted from sticker price even if they are typically offered to you in a financial aid package?

a) Because it's money you make have to pay back
b) To inflate the perceived value of financial aid
c) To encourage borrowing behavior
d) To reduce transparency in educational costs

Answer 1

Loans are not deducted from the sticker price when calculating net price because they are a future liability rather than funds reducing current educational costs, and must be repaid after graduation, akin to business investments in long-term projects.

Step-by-step explanation:

When calculating the net price of college, loans are not deducted from the sticker price because they are funds that you will have to pay back in the future. This is very different from grants and scholarships, which do not require repayment. The central reason behind not deducting loans immediately is rooted in the concept that these are future liabilities rather than present funds that reduce the cost of college directly at the point of payment.

Considering loans as a reduction in cost might mislead students into underestimating the true cost of their education. Instead, loans should be viewed as a form of financial capital provided by the market to meet current demands with the expectation of future repayment, similar to how businesses invest in long-term projects.