The Price You Pay for College: An Entirely New Roadmap for the Biggest Financial Decision Your Family Will Ever Make, by Ron Lieber (HarperCollins, 2021).
College is expensive. Aside from retirement, paying for college is one of the top planning priorities of financial advisors’ clients. Parents and often grandparents grow increasingly consumed with this question as their children approach high school graduation. For most American families that plan to send a child to college, it’s going to be a stretch — and it’s frequently fatal to parents’ retirement plans. The bad news: college costs are growing continuously and they’re not likely to get cheaper, while at the same time, it’s harder and harder for kids to earn more than their parents did without a college degree.
Against this background of desperation, the New York Times personal-finance reporter Ron Lieber has written a new book that answers the question of how clients can pay for college for their kids. Spoiler: if it’s important to your clients that their kids go to a highly-selective school like Stanford or Princeton, they will almost certainly have to pay for it, and they aren’t likely to get much of a discount from the school, unless the family has real financial need. But the book doesn’t worry much about families who are dead-set on the 30 or so most selective colleges. Instead, Lieber focuses on everybody else: the vast majority of families who send their kids to all the other schools, from the second-tier private colleges and large state schools to community colleges.
The book urges readers to figure out, first of all, what it is that they and their student hope to get out of college. “Is having an intellectual adventure paramount, or is finding your people or getting a great job most important?” Lieber writes. How families rank those priorities will determine how they should start to consider colleges. It’s important to consider what size college makes the most sense for the applicant, as well as what programs it offers.
What’s new about this book is the uniquely financial lens Lieber uses to help families understand how colleges make decisions on how much money to give a student as a tuition discount. He explains the baffling difference between financial aid (what a college gives families who can’t afford to pay full freight) and merit aid (the “scholarships” that students receive from schools that they are over-qualified to attend, even if their families can afford the tuition).
If your clients’ children are looking for the best deal, they will need to know how to arbitrage colleges’ merit aid offerings and — crucially — how to compare one college to another, taking into account the quality of the school across a variety of metrics, many of which are obscure and not easily accessible. Take honors colleges, for instance. If your client’s child is interested in an honors program within a larger university, often a state school, the parent will need to dig into what privileges the honors kids receive, what percentage of honors kids graduate on time compared to the school as a whole, and how this program stacks up to others where the child has been accepted.
“The thing that families need in this process and that all too many lack is a reportorial mind-set and a consumerist approach,” Lieber writes.
Covering personal finance for the last few decades at the Times and the Wall Street Journal, Lieber — himself an Amherst College grad — has seen his share of college-related insanity, like the affluent families who think they’re being strategic by not saving, figuring that colleges will bail them out with financial aid. (This tactic doesn’t work, especially for families with high incomes. College admissions officers can do math.) His book speaks directly to parents who want to do right by their kids, without going bankrupt or forcing their college graduates to support them in their old age.
The book also examines many of the hacks that families sometimes use to get around paying for college, including going to community college for 2 years before they transfer to a 4-year school (it’s very hard to do this successfully, the stats show); sending a child abroad to college (it may be cheaper, but European schools in particular lack most of the non-academic resources, counselling, and amenities that American kids expect out of their college experience); and going to a military academy or ROTC (this makes college free or nearly so, but does come with the ironclad expectation of military service and the very real possibility of combat).
Lieber also looks at some of the criteria that families should consider more closely. Mental health counseling, for instance, is often inadequate or absent amidst a growing student need for help. Many of the so-called “top” schools don’t require their most famous faculty to teach undergraduates, much less mentor them. If a child is interested in a school because of its party reputation, the family should think seriously about whether being surrounded by peers who may not care very much about school will affect their student’s prospects — or whether they might end up paying for extra years of college if the student gets derailed.
A good fit is key with an investment this large — one of the largest amounts of money a family shells out, second only to buying a home.
“I diverged from the generic ‘dialing for dollars’ path to advancement and set out to learn from entrepreneurs and leaders from books,” writes advisor Chip Munn.
“If you don’t finish college, that’s the worst financial outcome of all,” Lieber warns, because students or their parents are saddled with debt, or the loss of tuition payments they’ve already made, but without the corresponding jump in lifetime income that comes with a college diploma.
Because advisors play such an important role in helping families figure out what they can afford to pay and how best to structure that expense, Lieber recommends that families start working with a financial planner if they don’t already have one. He also wrote a free
The book drives home one point: College admissions isn’t what you remember from when you went to school. It’s way more competitive now, and exponentially more expensive. While it’s still technically possible for a kid to pay their own way through school, that’s not really reasonable for anything other than in-state tuition at a public university, which is one reason the student debt burden has ballooned so much.
