The college financial aid process can make parents feel overwhelmed and frustrated. Ron Lieber, author of THE PRICE YOU PAY FOR COLLEGE, says it’s not our fault: the system is designed to confound. Here’s how to approach this huge financial decision.
Sending a kid to college these days can cost well into the six figures, whether you're looking at state universities or small private colleges. There's merit aid to be had, but how does one find it? How much should you be saving if your kid is in kindergarten? And why have the costs of college skyrocketed?
Ron Lieber is the “Your Money” columnist for The New York Times and the author of several books, including The Opposite of Spoiled. His latest bestseller, named one of the "Best Books of 2021" by NPR and just out in paperback, is THE PRICE YOU PAY FOR COLLEGE: An Entirely New Road Map for the Biggest Financial Decision Your Family Will Ever Make– a book about who pays what, and why, and how the whole system got so complicated...
In this episode, Amy and Ron discuss:
In this episode we also discuss Ron's article for The New York Times: "Early Decision Isn’t Binding. Let Us Explain."
Find THE PRICE YOU PAY FOR COLLEGE in our Bookshop store: https://bookshop.org/books/the-price-you-pay-for-college-an-entirely-new-road-map-for-the-biggest-financial-decision-your-family-will-ever-make/9780062867308
@ronlieber on Twitter and Instagram
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Amy: [00:00:00] Hey, everybody. Welcome to "What Fresh Hell: Laughing in the Face of Motherhood." This is Amy and on today's Fresh Take we have Ron Lieber. He's the "Your Money" columnist for the New York Times. Three of his books have been New York Times bestsellers, including "The Opposite of Spoiled." He lives in Brooklyn with his wife, fellow New York Times reporter and Pulitzer Prize winner, Jody canter and their two daughters.
His latest bestseller, named one of the best books of 2021 by NPR and just out in paperback is "The Price You Pay for College: An Entirely New Roadmap for the Biggest Financial Decision Your Family Will Ever Make." Welcome, Ron.
Ron Lieber: Thank you for having me.
Amy: So give us the bad news first. How much does sending a kid to college cost in this day and age?
What's the range?
Ron Lieber: Oh, I mean, it's anywhere from zero to $350,000. Take your pick. I mean, we could talk about how people who are in the 1% even pay zero, it happens not [00:01:00] infrequently. And then there are sorts of low income people or lower income people who pay over $300,000, often all of it with debt.
So the fact that a system can produce results like that up and down the socioeconomic spectrum says a lot about the quality of the system.
Amy: Yes. I mean, your book makes the point that this whole process, it makes parents feel overwhelmed, speaking for myself, pretty dumb sometimes. And naive.
But that the process you argue is sort of confounding on purpose.
Ron Lieber: It is. And let's start with this notion that it can, and sometimes, or maybe even often does make you feel dumb. It is the system that is dumb, and it is not your fault. And if you feel confused or overwhelmed or like you haven't done enough as a parent, or you've done too much as a parent, and somehow that has put your kid behind the eight ball in some way that may or may not be [00:02:00] true, but is causing you a lot of anxiety.
You did not do this. You did not create it. And by the way, the people who run the systems currently, they hate it almost as much as you did. They mostly inherited this. People are not sitting behind some grand Wizard of Oz curtain, trying to make this as hard as possible, or as inequitable as possible or as expensive as possible. They took over the captain ships on the, you know, giant aircraft carriers and the aircraft carrier of college admissions and paying for college is something that, you know, could take a generation to turn around completely.
And in the meantime, those of us with teenagers are stuck with it.
Amy: And who does set the price? So if the financial aid officers at a given college are not in charge of this crazy system, who is, who, where did the system come from?
Ron Lieber: Well, I mean, there's a lot of answers to that question. I mean, you can make a strong case that the market sets the price.
There is [00:03:00] ability to pay. And there is willingness to pay. And there's often a gulf between those in the same household that goes unspoken to the detriment of the parents and especially the teenager. If we're talking about state schools, you could make the case that the state more or less sets the price by virtue of the subsidy that it does or does not provide to the state institution.
But what people forget, or don't realize on a long list of, you know, maybe several dozen things that have changed drastically since you and I went to college -- what has changed is that in terms of the state universities is that the subsidy from the state legislatures has fallen at a time when the cost of providing the type of undergraduate education that the market demands has risen faster than the rate of inflation. So one of the places you see that bearing out is not just in the fact [00:04:00] that if you live in New Jersey, if you live in Illinois, in-state tuition, room and board, all in, it's going to cost more than $30,000 per year. The fact that a state school education can cost $125,000 a year at the rack rate is bad enough if you are an out-of-state student.
So you're a kid from California that wants to go to UC Boulder. Or you're a kid from long island that wants to go to the University of Indiana. They are going to milk you for everything that you are. Because state subsidies have fallen and so they're gonna rope in as many upper-middle-class or, you know, one-percenter families from elsewhere and charge them 45, 55, $60,000 per year, all in.
Those are the state institutions. At the private institutions who sets those prices? Well, I don't know if you talk to Bowden College, they will tell you [00:05:00] that everybody gets a scholarship because the actual cost of providing that high-touch artisanal, extreme student-centered education is in fact, $15,000 more than whatever the rack rate is there. So that's endowment driven. That's driven by the administrators, you know, it's, it's maybe driven less by the market than you may think
Amy: From the outside, it's easy to kind of throw your hands up and just be like, this is preposterous. Like, nothing should cost this much. How could it outpace the rate of inflation? There's no way that educating kids could possibly cost this much, but I was surprised reading your book that actually it does. I mean, it might be too expensive, but they're not making it up that it's this expensive.
Ron Lieber: No, I don't believe that they're making it up. All these institutions, you know, that most people listening to this podcast would send their kids to are non-profit, you know, there's a whole world of for-profit schools that are in fact exploitative in their own very specific way. What's going on here is that, you know, the cost of [00:06:00] providing the type of education that is expected--and I use that passive verb deliberately--and we should talk about expected by whom. The cost of providing that expected education has in fact gone up at a, you know, pretty insane rate. Now, why has that happened? Well, you know, 60, 65% of the costs at, you know, a private university and college, it's a little bit less at a public school for a variety of uninteresting reasons, but you know, the majority of the costs of most of these places is from people. Hiring good people is expensive. If you are going to be a professor with the kind of brain power that that requires, it is reasonable to expect a relatively high rate of compensation for your trouble.
And there is a market for, you know, the very best teachers and scholars and researchers. And so, [00:07:00] you know, those folks earn an above-average salary, and then there are way more administrators per undergraduate, then there used to be now, why is that?
Right? If you talk to faculty unions, they're really upset about this, right? All these high- paid administrators, you know, keeping them from getting the raises they think they deserve. But if you talk to the institutions, the college presidents, the boards, right? They'll tell you that there are way more administrators, because that's what we want, right? That's what the parents are demanding. Super awesome excellent technical networks with lots of high-speed internet access, you know, on the quad, right? Like somebody's gotta build those antennas and buy them and administer them, right? You want a better career counseling office? Well you better pay for it.
You want there not to be a four-week wait to see a psychologist on campus? That costs money. Right? And then there's a whole, you know, federal infrastructure of regulations that didn't exist a generation ago [00:08:00] and to deal with all of those regulations and make sure you're in compliance. That means more administrators, right?
So we get rid of all that, but we voted for those regulations at the ballot box. Right? And we sort of want our disabled students to have access, and we sort of want our female children to not be discriminated against and have equal access to the sports fields. But that means more athletic coaches, more facilities, not having inequity in, you know, the weight room at the NCAA women's basketball tournament. Is it on us that this is where we've ended? Or is it on the institutions? I think that's a real question.
Amy: We're talking to Ron Lieber, his book, just out on paperback, is "The Price You Pay for College" and we'll be right back. So Ron, you set something up in the book that I definitely recognize as something that happened in my case, which is that when you have a kid, a high school senior, by April, everybody knows where they're going. And you hear the very wide range [00:09:00] sometimes of merit, scholarships, and aid and things that were offered. And kids are having a very wide range of schools that they're going and prices that they're paying to go to those schools, to the extent that your kids, friends, parents are willing to be forthcoming.
And there's always: how did they know about that? Right? Like, how did they know about that for your scholarship to apply for? How did they know about this grant process? It's completely opaque. And why is that the case, and how does a parent in this position start to attack that?
Ron Lieber: Well, I guess I would start by saying that just because the administrators of these institutions are mostly blameless for the system as it exists, does not mean that they are not extremely cunning in how they maneuver within that system. Right? So there are only so many people in America who [00:10:00] have both the ability to pay the full price and the willingness to do so. And as much as many listeners may think that it's become quote unquote impossible, you know, to get into the quote unquote best schools, the fact of the matter is that there is an intense competition for the people who have the ability to pay more than average. And so what people don't understand, even extremely sophisticated parents who are, you know, sort of captains of industry or, you know, the very best non-profit administrators or outstanding public school teachers--there's no reason for them to know how all of this works. And the way that it works is that there is actually an incredible amount of discounting going on to and for people with the ability to pay who may lack the willingness to do so, right? Because if the rack rate is $75,000, but the cost of educating any given student is only [00:11:00] 40.
If they discount to 56 or even 48, you feel good about this pat on the head that you've gotten as a parent and student, that you've quote, unquote merited, but you're still profitable, in effect, to the institution and they can use that extra money to cross-subsidize somebody else. So that's how it works. Most people don't have any idea that that is happening at really, really, really good schools.
Amy: Let's talk about the ED, early decision, process. That's the process by which your kid can commit to a school very early, November first, sign a document saying if I get in I'm going, and you get higher admission rates if you ED to a school. What you don't get is any indication of what you are gonna be expected to pay as that child's parents. So that's sort of broadly envisioned as something that's only available if financial aid is not a concern for your family. And that early decision is then perhaps unfair. You have written a lot about early decision and how we [00:12:00] might all be thinking of it the wrong way. Can you tell us a little bit more about that?
Ron Lieber: Sure. I mean, I think it's fair to begin with the hypothesis that early decision is classist. I mean, you know, many of us work in our day jobs or, you know, as public citizens in the world to try to create more equity in our daily life and in our politics.
And so, you know, we should begin by acknowledging and just stating for the record that this is one of many areas where you are at an extreme advantage if you have both the ability and the willingness to pay whatever the full price is. Now, why is that? Well, again, when you're signing up and signing an early decision pledge, you are sayin--in theory, right? We'll get to the "in practice" in a second. You're saying in theory that you're gonna go if you get in, right? And so the colleges kind of have you over a barrel. Right? Whatever they offer you in the way of need-based financial aid or merit aid, or some combination of that, you're [00:13:00] saying basically, you know, that you're gonna accept that.
And so why would they use their more generous offers in the early decision round when they think they have you over a barrel, righ? Now, a whole bunch of asterisks first: every college has to maintain what's known as a net price calculator. If you think there is even a chance that you may qualify for need-based aid, you need to fill out that calculator, right?
Because that calculator's gonna give you an estimate of what kind of financial aid the school may offer. And then if you get in Early Decision and they lowball you, right? The offer is not as good as what the net price calculator says. You can go to them and say, "Hey, what happened here?" Right? And then maybe they'll adjust the offer.
Now, many schools will not predict what kind of merit aid you might get. And to my mind, if an institution will not give you an estimate ahead of time of what kind of aid you might get or gives you an estimate [00:14:00] and it's wrong on the low end, then you can and should go back to them after you get an early decision.
And if they don't give you a number that you believe is affordable then you can and should take a walk and break that early decision commitment. So I laid down that gauntlet in the New York Times about a year ago. And as I understand it, the number of people breaking early decision commitments this year went up by enough that it was noticeable.
And apparently it had more than a little bit to do with that column. I am proud of that. I hope people pass it along. Early decision is a racket and schools use it to create as much certainty for themselves around revenue, projections, and being able to sort of meet their numbers. Their ability to meet their numbers is not our concern. Our concern is our ability to pay, our willingness to pay, having that conversation, you know, with our children and making sure that we [00:15:00] are not ending up in an emotional trap where we are paying more than we expected and more than is affordable. So to that extent we are in opposition to the early decision racket and it is our job to try to break it when appropriate.
Amy: Can I ask a follow up question on that? If your kid applied early decision somewhere but if you got a better offer from Wellesley in April, can you then go back to Oberlin where the kid was ED and say, "Hey, Wellesley's gonna give us another $10,000."
Ron Lieber: I don't think you should be breaking any of the school's rules. So to the extent that they're telling you not to apply any place else, that's a pledge you should keep. I'm talking about a very limited circumstance where the school refuses to give you an estimate ahead of time or gives you an estimate and it's wrong and then expects you to sign and keep a commitment that you will go no matter what, when they haven't given you an accurate [00:16:00] sense of what you're expected to pay. I don't think it's fair or equitable for them to expect you to give up what may be better admissions odds in the early decision rounds, just because you have an affordability issue.
That is classist. And we should break classist systems where we have the ability to do so. There is a crack in that dam, in that narrow context. And I hope it springs wide open, but we should not be, you know, playing games what the actual rules are, because that feels like going too far. It is only, you know, to my mind where the schools have unreasonable expectations, where we should do that. And by the way, in that story in the Times, this isn't in the book, but, you know, I figured this out afterwards, all the schools were like, "Yeah, you can do that. No problem." They don't want people to come and be angry and be in more debt and then be telling those stories in public.
It's just one of these unknown things and, you know, school counselors got [00:17:00] so mad at me. You know, because they think it's all gonna blow back on them and there's gonna be retribution. And, you know, as soon as somebody can prove to me that schools are holding it against high schools and counselors, that people are breaking early decision agreements for affordability reasons, as soon as they can prove that that's happening, come and tell me, and I will write about that college and we'll put stop to it.
Amy: Let's pivot to maybe the hardest part of this, which is talking to our kids about what we think we can contribute to their college education and how that's going to affect where they apply and where they go. You argue that we usually start that conversation, you know, maybe end of junior year, beginning of senior year, or when it's time to send the applications, which is way too late.
When should we be starting this conversation?
Ron Lieber: Well, I think the conversation has to start with you and your spouse, if you have one. With your ex, if you've got one of those and with yourself, if you're flying solo on this whole venture, and if you wanna [00:18:00] get outta your own head, you should find your most level-headed, financially sophisticated friend or attorney or financial advisor or boss or underling, you know, somebody who's gonna challenge your thinking on it because you wanna make sure that if there is another parent in the picture that both of you are on the same page. Because if you are speaking at cross purposes to your kid, that's gonna be confusing for your kid and your kid may not have the guts to, you know, try and get both of you sitting down at the same table, to be like, "Hey, I'm getting mixed signals from you. And I need to know exactly what you are able to pay and what you're willing to pay." And if there is a gulf between those things, because there are all these parents out there running around being like "Great or state!" We'll pay for great or you're going to state.
And there's so much wrong with that. There are all sorts of state institutions that are like twice as good as schools that charge $300,000. So like, what does that even [00:19:00] mean? And if you try and kind of pin people down on what they mean by great, they say, well, Ivy League, well, the dirty little secret is that there are a lot of really unhappy undergraduates at Ivy League institutions.
There is a lot of customer dissatisfaction at those places, some more than others. So like, what are you even talking about? Like, great to whom? Great for whom? So, I mean, you need to interrogate what you think are your rational parameters that you're setting up because usually they're irrational, totally emotional, and you haven't even diagnosed the unhelpful emotions that are causing you to think the way that you do. So only then can you have the conversation with the kid.
Amy: Yeah, that makes sense. We're talking to Ron Lieber, his book just out in paperback is "The Price You Pay for College" and we'll be right back.
Okay. We're back talking to Ron Lieber. Okay. We've gotten on the same page as our spouse about how paying for college is going to go. Now we have to talk to our [00:20:00] kid. When do we have that conversation? How does it go?
Ron Lieber: I think you need to have that conversation or some abbreviated version of it at the very latest after eighth grade and before high school. And I get in a lot of trouble for making this point because people feel like talking about college before a kid has even started high school puts undue pressure on kids who already have a lot of pressure on them. But, you know, we can't make this college stuff go away. It's in the air. Their teachers are gonna be talking about it.
Their friends are gonna be talking about it. They may have older siblings who are running the gauntlet, their older friends and teammates, and you know, people in their theater programs, whatever, they're gonna know. So just allowing all of this to exist in the ether and being silent about it can actually create more anxiety than the real practical information and the real practical information, you know, goes something like this:
Look, before you start high school, we wanna make sure you understand my or our [00:21:00] intentions here. We have the ability to pay X. We have the willingness to pay Y. And we are operating in a pretty messed up system here, and we need to let you know how it works and the way that it works in no small part is that at many schools, but not all what you will pay will depend on your grades.
Maybe your test scores, if those still exist in four years, and anybody cares at that point, and some of the things you do outside the classroom. So we're not saying this to put pressure on you. Different schools will discount at different levels for different kids. And there are hundreds of fantastic undergraduate institutions in the world, but we would not be doing our job, my job, if you're a single parent, if we didn't explain to you how things work. Because I, we, don't want you to end up in the middle of junior year or the beginning of senior year wondering why it is that we didn't explain to you how all of [00:22:00] this happens, because that, that would be the bigger mistake as a parent to allow you to be ignorant and to maybe have made choices that put some or another school that might be interesting to you out of reach financially.
Amy: And I mean, what's hard about this is you say that having these conversations, they're sort of nested silences, you say in the book, which I believe is Caitlin Zaloom's term-- so I wanted to throw that it's her term, but it's a great one, nested silences-- that within this, are discussions of your family's wealth, their friends' families' lack of wealth, right? And where they fit into a system in ways that we usually pretend that we don't see .
Ron Lieber: Thank you for bringing that up. So this may feel very uncomfortable to you. You may or may not have, you know, a finely tuned sense of the gradations of social class difference in your community. I sort of develop those antenna for a living and try to develop them in other people.
But you know, in many ways, [00:23:00] this conversation here in "The Price You Pay for College" it is kind of part two to a different conversation I started in 2015 when I published a book called "The Opposite of Spoiled. That's basically all about how and when and why to talk to kids about money and what to say when you do.
Because if this conversation starts at 14, it will feel awkward and foreign. But if the conversation has started at four and your kid's been getting allowance and they've been getting increased responsibility and bigger decisions to make and there are more conversations about, you know, how the grownup or grownups in the household are making their own decisions, this will feel like a natural evolution. So, you know, for people who have kids who are younger, who are listening, the the conversation about money in general has to kind of start, you know, before kindergarten. Not every day, not, not every week even, but there needs to be sort of an acknowledgement that money is a thing that makes the [00:24:00] world go around, whether we like it or not. And the decision about how to save, how to pay and especially what to pay for college. These are some of the biggest financial decisions that any of us will ever make. They are certainly among the most emotionally fraught, 'cause they involve our children and we can't start those conversations late in the process without, you know, potentially doing some real harm because the kids don't know what to expect or what's available.
Amy: I wanted to talk to you about two of the sort of ideas that I've heard more than once, about ways to get around this--sort of hacks to paying less for college--and see what you think about them as reflected in your book. The first one is this idea that you should maybe send your kid to community college for two years, and then they can transfer to a university. You get the prestige degree without the price tag.
Ron Lieber: You know, community colleges are open to essentially all comers. They are really inexpensive. Sometimes they're free [00:25:00] depending on the state and the circumstances. There are some incredible teachers there, and there are kids from, you know, all over the place who are in school for all sorts of different reasons.
So, you know, the majority, in some cases, the vast majority of people who start community college don't end up at a four year school within two years. And if, so, your goal is to get out of there in two years and get to the flagship state institution, you need to find the person at the community college who owns that process, you need to find the person at your intended destination who owns the process of making sure the community college kids have the right prerequisites and you know, are able to get in without losing a bunch of credits, and you need to make both those people your very best friends. Like, you should move into their offices and you should sleep at the foot of their beds. You should not make a move, you should not take a breath without asking their permission, both of them, and checking with them so that in fact you can get it done [00:26:00] in two years and you ca' get into the state institution two years later without losing credits. 'Cause if all this takes six years, you know, then you've lost two years of income and you've spent more money than you need to. And you know, you haven't achieved the goal of actually saving money through this process.
Amy: And what about people who would say, look, I'm never gonna save $300,000 for my kid's college education, not possible, or I have three kids or whatever. So it's better not to save at all because that way, when there's time for need-based aid, we'll qualify for more because we don't have anything.
Ron Lieber: Yeah. That's not how it works, unfortunately. I mean, a couple things about that last part, right?
Amy: Oh, well.
Ron Lieber: Financial aid is almost entirely based on your income, not your assets. You know, the formula tries not to, you know, tax or penalize people who have saved a lot because then word would get out and, you know, there would be a disincentive for savings.
It's, you know, mostly based on your income. And so, you know, if you have a household income of more than let's call it $250 or $300,000, unless you've got three kids in [00:27:00] school at once for now, you know, until the formulas change, which they may or may not sometime in the near future, you know, you're not gonna get any need-based aid. So you better be saving. And also remember that the financial aid officers are human beings and they make judgements and are judgemental, even though they're trained not to be. And you know, if they see some family with $500,000 in income, you know, and a boat and second home, and they're applying for financial aid and there's no money in 529 accounts or savings, they're gonna be like, "What the hell?"
Now, there may be a reason for that. Maybe you only started earning $500,000 18 months ago and before that you earned $50,000. This happens, right? If so, say so. Gotta tell them that there's a reason why there's no savings. So yeah, that's not really how it goes, but don't beat yourself up. If you cannot save a hundred thousand dollars or $300,000 per child, you are doing the very best you can. It does require... the irony here is that it requires a [00:28:00] ton of investment to get a kid to a place where they can, you know, apply to a college that rejects the majority of applicants. You know, you gotta be in the right school district and pay all those taxes and then the housing prices and, you know, quote unquote enrichment activities and, you know, whatever else goes on.
And so, just save as much as you reasonably can. I mean, there's some formulas I have in the book that, you know, there's sort of like the rule of thirds: you save a third, spend a third out of current income while your kids are in college and you eat rice and beans and don't go on vacation.
And then, you know, borrow the last third with parents taking on half and the kids taking on half. You know, at a state institution that turns out to be a very reasonable amount of money all the way through. Now, if you've got three kids and you hope they'll all go to a private college and you're not gonna qualify for any merit-based state, that's another thing entirely, you know, that may mean a second job, a third job, you know, a whole bunch of debt. That's where the decisions [00:29:00] get trickier about ability to pay, ability to borrow capacity, and then willingness to do so. It is those families that think very hard about merit aid ahead of time, and need to be super strategic about it as early as possible and not wake up, you know, in October of the kid's senior year realizing that they don't understand how this really works and how to navigate through the system.
Amy: This book has such a specific roadmap for that. I feel like after this conversation, we've sort of felt like, well, this is a big problem and it is, and it's very confusing and it's very complicated. But this book, Ron, is so full of specific strategies that I think would make any parent walking through the financial aid process feel better as well as all kinds of other things. I mean, I learned tons from this book about the things I'm engaging with right now in my child's search that have nothing to do with financial aid, like: Is a small classroom size always better than a big classroom size? Is a school with a fancy name you've heard of [00:30:00] always better than the one you haven't heard of? These are big questions. And I feel like this book has tons of useful takeaways for all of these questions, no matter how old your kids are too, I would say.
Ron Lieber: Thank you. I mean, more than anything else, I kind of live and work and serve to be useful.
You know, there's some pretty good storytelling in here, I think, but more than anything else, I wanted people to be able to put this thing to work and feel calmer by the end. You might be angry on page 75, there may be places where you're confused or befuddled, but at the end, I'm hopeful that everything is clear as day. You've got a roadmap and you have maybe a little more hope than you did on page one.
Amy: Absolutely. So Ron Lieber's book, just out in paperback, is "The Price You Pay for College: An Entirely New Roadmap for the Biggest Financial Decision Your Family Will Ever Make." Ron, tell our listeners where they can find you and your work.
Ron Lieber: Sure. I'm easy to email@example.com. I write the "Your Money" column for the New York Times at nytimes.com/lieber. [00:31:00] That's my own sort of personal homepage there. You can find all my most recent work and I'm on Instagram and Twitter @ronlieb.
Amy: Okay. Thanks, Ron. Thanks for talking to me today.
Ron Lieber: My pleasure. Thank you for having me.