New York Times Columnist Ron Lieber Shares College Savings Guidance In New Book

New York Times Columnist Ron Lieber Shares College Savings Guidance In New Book

This week, journalist Ron Lieber—who has written the “Your Money” personal finance column for The New York Times since 2008—releases his new book, “The Price You Pay for College.” 

Lieber combines his decades of experience exploring and writing about higher education finance with new insight into what the Covid-19 era means for the value of a degree. Geared toward parents, the book offers an expert’s take on how college prices are determined, why they’re so high and how families can approach the many decisions required to pay for college.

Forbes Advisor spoke with Lieber about the book and his advice for families. This Q&A has been edited for length and clarity.

After writing the book and now looking back on your reporting, what are the top pieces of advice that you want readers to take away from it?

I hope that readers will ask better questions of themselves and of the institutions. One of those is, what is the point of college in the first place? It feels kind of existential, but you have to answer that question for yourself.

What I found talking to families was there were three things going on. People were going to college for the education, to have their minds dismantled by expert instructors and reassembled into something bigger and better; they were going for kinship and friends, to find their people; and then the third was a credential, which could be a teaching certificate or an accounting degree, or something else that gives you a firm grasp on the middle class part of the socioeconomic ladder if you’re not already there.

Then there are other people who go reaching for more of a gold-plated, brand-name degree. I make no judgments about how families divide those three pieces of the pie. You just need to be intensely honest with yourself about what it is that you’re doing, because if you’re not, then you can’t make a good purchase decision.

Then we can talk about the questions that people have or should have for the institutions. To me, there are 10 or 12 things, entire categories of things, that people ought to consider spending a whole lot of money for when they’re purchasing an undergraduate education—and it may well be worth paying more than you might for the education at your flagship state university.

But not all of those things are going to be important for all students, and you have to know the right questions to ask. So I’d say the bulk of the reporting I did over several years was trying to figure out what those things were, and the right questions to ask of the institutions, and the data to demand about those things.

What did you learn that surprised you while you were doing that reporting?

When I think about surprise, I don’t think about mine first. I think about surprises that college presidents themselves encounter when they start this job for the first time. And the one they talk about most is the fact that nobody tells you before you get this gig that 10 or 15 or 20% of the first-year students are going to be showing up with prescriptions for anti-anxiety medications or other mental health prescription drugs. There is a near-epidemic of mental illness and mental health struggles among adolescents.

Thankfully, we are becoming more adept at recognizing this and diagnosing it and taking the stigma away. But providing mental health services was never a core competency of residential undergraduate higher education institutions. And these presidents are just kind of lost trying to figure out how to solve for this and do it well, and many of them don’t do it very well.

So if your child is in treatment, or if you think there is a chance that they might want to be or need to be, there is a whole set of questions that you need to ask about this.

I think the thing that I was most surprised by is the number of otherwise extremely sophisticated people who come to me in March or April of their oldest child’s senior year in high school and say, ‘Ron, I can’t make any sense of what just happened here. I didn’t realize you can negotiate a financial aid package, I’ve never heard of merit aid, I don’t know what these schools are offering and why, and I feel like we might have done it wrong.’

And most of the time they’ve entered the process without the right information. And it’s not their fault. The system has become incredibly complicated. A lot of what goes on behind the scenes is opaque and unpredictable, and it is not the fault of parents. But they need to go in with eyes wide open.

How has Covid-19 changed everything? And what hasn’t it changed about the questions parents should ask, and the decisions they’re making, when sending their kids to college?

One thing Covid has done that I had not expected is that it brings into sharper relief what it is that people are paying for—particularly when they’re paying $80,000 a year as they do at the University of Chicago, say, if they don’t get financial aid.

When everyone was sent home in March and told to stay there all spring, the education that very well-meaning professors—who had no training in this technology in most instances—were delivering in Zoom rooms was subpar. And I don’t think there’s anybody who would argue with that.

So people were not getting what they paid for all of a sudden. The same thing is true with kinship. It’s hard to make friends in the Zoom room. The credentials were still arriving on schedule, but often as an afterthought: If there was a paper certificate at all, there were no graduation ceremonies for these folks. It was incredibly disappointing. It was helpful for me to see just how customers in the market behave and what it was that they craved and what it was that they missed.

What advice do you have for students considering transferring to a community college or opting to take a gap year as a result of those changes to the college experience?

First of all, are you really going to get your money’s worth if everything is still compromised in the fall, or are you better off taking a semester off or a whole year off, even if the experiences you could pursue during that time away are themselves compromised? You want to think about what value you actually receive if you’re going to flush up to $80,000 into one of these schools.

The other thing you need to keep in mind is that these schools are running very sophisticated pricing and discounting algorithms behind the scenes that they don’t like to talk about. Those algorithms often do a pretty good job of figuring out what kind of discount to offer to what kind of student, but boy, did they not work very well this past spring when everything was up for grabs. And my guess is that they’re still not going to work very well this spring.

So what does that mean for consumers? It means that prices are flexible; things are unpredictable; you should not make any commitments until the very end because there may be a lot of money being thrown around. And do not hesitate to ask for a better deal, because you just don’t know what’s going on with any given institution or how desperate, and surprisingly so, it may be come March 22 or April 25 or even June 12 to fill more beds.

What’s the best or most useful savings strategy you’ve come across in your reporting that you’d recommend to readers?

Save whatever you reasonably can, do it regularly and in an automated fashion, and don’t overthink which 529 [plan] in the best state has this or that track record. If you have a state tax deduction in your state, use that plan. If you don’t, maybe use the Utah plan, which is very low cost and has good Vanguard funds.

Now, everybody’s financial situation is different. But I would just encourage people to ignore one rule that has become a maxim of financial planning that is actually false. All over the place, you see people who should know better saying, ‘Well, if you have a choice between saving for college and saving for retirement, you should save for retirement first because you can’t borrow in retirement.’

But this is not true. You can borrow for retirement, and the way you do that is through a reverse mortgage if you have a home and home equity. And a lot more people are going to need to do that for reasons that are not germane to this conversation. Not saying that you should shortchange your retirement; everyone’s situation is different. But what I do know is that people who save for college almost never regret it. And if they have regrets, it’s that they did not save more to create more choices.

So as with everything in life, and everything with financial planning, there are tradeoffs involved. And one thing that I do hope people will do is talk about the tradeoffs they are considering with a neutral party, perhaps a fee-only financial planner, to help get their heads on straight and set a strategy hopefully when their child or children are younger.

For those students who want to ask for more financial aid from a college that’s accepted them, what are your best recommendations for filing a successful financial aid appeal? 

First, you have to recognize what kind of appeal you’re even filing. Are you appealing the determination of financial aid that is based on your need—based on the money you earn and the money you have—or is it an appeal based on the merit aid discount that the school offered?

A need-based aid award appeal will go to a financial aid officer. A merit aid appeal will often go to the admissions office or someplace else. Sometimes the ‘award letter’ that you get from the institution does not even make it clear what kind of scholarship you’ve received. So it starts there.

And then, the approaches are different. With the financial aid award, you generally have the most success if something significant, particularly with your family’s income or the expenses that you can’t control, has changed since you filled out the financial aid form. And if it has, you want to say so in as few words as possible—because financial aid officers are very busy in the spring—and send the note off and be polite about it.

When it comes to merit aid, that is trickier and you have less leverage. You really don’t know where you sit on any given school’s list of desirability. All sorts of people are getting different offers, and you probably won’t know what’s available to you.

The best approach is one that is relatively humble, where you go and you say, ‘Look, I’d very much like to go to your school, but the problem I face is that my family does care about the financial side of this, and the net price I would pay over here at this other school is significantly lower. And I’m just wondering if I did anything wrong in my application, or if there’s anything more that you’d like to know about me that might cause you to reconsider your award.’

But you also need to be clear: The other institutions where you’re comparing your awards—it really needs to be a direct competitor with your institution. Schools can be a little snobby or peevish about that. A more selective school is not going to match the discount from a less selective school. But if they’re roughly in the same plane, it’s worth a shot.

You don’t get anything that you don’t ask for, and the worst thing that will happen is that they’ll say no. And both in the financial aid office and in the admissions office, nobody will hold it against you, let alone yank your offer of admission, if you ask.

In the book, you say the amount students should borrow in student loans should be no more than the federal loan limits, which are relatively low. How did you come to that conclusion? 

The reason why it is extremely helpful—but, I would say, not mandatory—to limit student loans to the federal undergraduate student loan cap is because those loans, unlike private loans, come with a much longer list of ways in which you can be flexible with the repayment, including various forms of income-driven repayment.

That is not available to you if you get a private loan with a parent co-signer, and it’s generally not available to your parents if they take out a PLUS loan.

There may be people who are going to Carnegie Mellon to become engineers and they’re probably going to earn $100,000 right out of college. So if those people take another $20,000 in private student loan debt co-signed with their parents, it’s probably not the end of the world, as long as they’re sure they’re not going to switch to a theater major.

You gotta be sure as a teenager about your career path if you’re on a trajectory to borrow $50,000 instead of $30,000. That is a hard thing to expect or demand of a teenager. So this is the risk of going over the federal loan limit.

The other thing you have to keep in mind is that you as the student and your parents will be tied together financially for years afterwards, because if you don’t pay that private loan on time, then you mess up your co-signer’s credit score.

Is there anything else you want to make sure readers understand about the book, the reporting or about paying for college in general?

It is so easy in this circumstance to assume or believe that the system works just like it did when we, middle-aged parents, were in college a generation ago. And I can see why people would think so, because the institutions themselves—the educations they provide, the experience there—those are not all that different.

But wow, is the price different, wow, is the discounting different. This whole merit aid system kind of grew up from whole cloth starting in the ‘80s, but it really has come into its own more recently. So given the price tag for this thing could be over $300,000 in today’s dollars per kid after taxes, it could well be the biggest financial decision your family will ever make. So it literally pays to get educated on how the process works and how it’s changed.

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