Lieber on New Book

uh and my daughter. More importantly, Ron Lieber is the Your Money columnist at the New York Times. He writes about personal finance for The Times before that at the Wall Street Journal, my alma mater. His new book is The Price You Pay for College, an entirely new roadmap for the biggest financial decision your family will ever make. Ron joins us on the phone from Brooklyn. Um, Ron, great to have you here with Tim and myself. UM, welcome, welcome.

So tell us about this book, what you set out to do, what you wanted to find out and kind of peel back the layers of this process. Sure, so this is a book that was born of a problem

in my in box. Each spring I was hearing from otherwise sophisticated people, successful ones who run organizations in New York City that you've probably heard of, who felt like they've been run over by a freight train when they got to the end of this and realized that they had no idea how the levers of discounting were being pulled, not just for people with demonstrated financial need um, but for affluent people who were getting discount offers anyway, and

they just had no idea. And this went on spring after spring, and I finally realized, Wow, um, I not only need to explain this to people, but we also need a better set of questions for parents who are trying to figure out whether you know, Princeton is two hundred thousand dollars better than Rutgers or Mount holyokeaus two thousand dollars better than the U mass We just needed a better set of questions, and we needed answers from the schools and the data that they do not like

to give up run Um. I didn't graduate from college that long ago, but it's like my alma maters like almost twice as expensive as it was when I graduated back in what two thousand six? How How does this happen. Well, there are a couple of things going on here. Right. There are lift prices, right, retail prices, the rack rate like the price tag you see on the back of

the hotel room door. And then there's the price that everybody is paining, right, and so on the whole something like of all undergraduates nationwide gets some kind of a discount. It's either through need based aid or this so called merit aid that comes regardless of your ability to need you know, to pay and and main facts have nothing to do with your grade, and essay scores are very little. Um.

So you know, it gets complicated. But the farther you go up the food chain to the most selective publics and privates, the more likely it is that people are painful price. And some of these institutions, as many as

six of the families are faithful price. So what what What seems so crazy to me, Ron is why don't we just mark the price like it should be, because I feel like we're on this crazy like hamster trail, like kind of you know, um, And it's just schools have to raise a lot of money for their endowment and people have to donate a lot of money for it, and I feel like the cost of the school has just gone on and like there's just this weird thing

that's going on. Why don't we just set the price as it is what you know, what we're getting, and and maybe it would make it more affordable that you wouldn't need to have so much um need based aid go out. Yeah, you know, I wish it was simpler, right, But we're generally talking about two different kinds of schools, right, We're talking about the public ones and the private ones.

And then the private ones themselves get subdivided because there are you know, private super selective schools that do have endowments that throw off a fair amount of income each here. But then there's a whole mess of private ledges and universities that are extremely tuition driven and they don't have endowments that are off enough money to you know, support the institutions. And so there's a transfer going on of you know, higher income, higher price DAGG people subsidizing the

lower price DAGG people. So you know, you ask about this notion of a tutition reset, right, why don't they just lower the price if everybody's getting a discount anyway, So that would pose two problems. First of all, there is this theory in the higher education marketplace known as the hivest Regal effect that's based on a legend that may not even be true that at one point in the past chivst Regal tripled its price and quadrupled its

sales overnight. And so these schools feel like if they lower their list prices that people will think less of them. And then just about every school, though not all of them, there are a few people who still pay full price, particularly international families or just the you know, people domestically who are just like Thanking. They're lucky ours that their kids got their act together, and they're happy to write

a check of any size. Right, you lose that revenue, you lose that incremental revenue if you lower the list price. I'm still having trouble ron getting my head around the the the question why college tuition has grown so much more quickly than inflation, especially over the last thirty years. Sure, well, let's start with the state institutions. So what's going on there is the subsidies from the state legislators have fallen in the last big recession in oh eight oh nine,

two thousand and ten. They just cut this to the to the bone. And the easy thing for the state universities to do, uh, to make up the differences, to you know, raise the prices to the people who live in the state and also to try and attract more people from out of state and charge them even more with the presents. It's a little bit different. And what they said to me over and over again when I was in um, you know, the offensive these presidents demanding

the same information that you're demanding for me. They said, look, what do you want us to do? Like sixty to sept percent of our costs are professors, administrators, and staff. And you know, if you believe the Wall Street Journal editorial page, we we we've got an administrative bloat problem here because of all of the regulations. But the regulations come from the legislators that we all vote for at the ballot box. And we as parents want our kids

taken care of. We do want our kids with mental health issues and disabilities to be able to access these institutions. We want our daughters on the ice hockey of you know, in the ice hockey ranks the same way that the guys are. And to keep track of all of this stuff and and make sure that all students are well served and equally served. Does require trained people and they are not cheap. Wow, okay, well there are a lot of Really it wasn't It's not because they need to

mode the law. You know that most of these institutions are not growing that much geographically, and so you know, the lawn only costs so much now, things like lazy rivers and climbing walls. These have become sort of like totems and boogeyman's um, you know, for people who say college spending is out of control. But this is the manner in which our kids have become accustomed, right. I mean, many high schools have climbing walls now, and we're the ones who take kids on vacations to places to have

lazy rivers. And really there's only a couple of dozen lazy rivers and all of higher education. So you know, it makes for a nice headline and a funny talking point, but these are not the reasons why college costs a lot of money. But I want to go back to what you said, because I do think that there is a belief in this society in many ways that the higher something costs the better it is, and we definitely

apply it to education. So what's your what's your advice to parents who you know, I just went through this with my daughter, you know, and the thing is doesn't feel like that there's many cheap schools in expensive schools out there anymore. But what's your advice as someone goes through this process with their with their students. Well, I'd start by ignoring the list price altogether, the retail price.

You've got to determine if your family is going to have any financial needs defined by the Financial Aid Office.

You've got to determine if the schools that are interested in do any discounting on the basis of what they refer to as merit, which you know may have something to do with the grades and the sa T score, but a lot of other things you know, in your kid's portfolio, and look at what the you know, the average net price is right, um, And so that may not blow your mind quite as much, but it is true that there are plenty of people out there making

choices between three hundred thousand dollar schools and one hundred thousand dollar schools over four years. And there's got to ask basic questions about what college is for right? Is your kid there for the education because they want to get into a top five marine biology PhD program? Um? Are they there because they want to be in line at y Combinator or Clienter Perkins at the age of twenty four? For startup money? If that's your goal, you

may need the three hundred thousand dollar school. Um. But you know, it just depends on on the kid and what they intend to do with themselves while they're there. Um. You know, it sounds like the system is a little broken. Ron, what do you think I mean? Do we need to change this? This is a this is a lot of money.

So here's the thing, right, you know, my role at the New York Times, and what I consider to be my role in life is just to help people work within the system as it exists and beat it when necessarily. But I'm all for breaking it. Uh. The problem is, Um, you know, I have no beef with people to think this is all ridiculous, right, Um, there's so much complexity built into our personal financial lives, and so this just seems like a natural logical extension of that. Um. But

how exactly would we dismantle this? And with what a little cool will um. You know we can you know, we can barely uh, you know, we can barely get it in a situation in Washington where even ten thousand dollars of loan debt is cancelable or forgivable. I mean, that's gonna end up being controversial. So free college for all, free college for people who have under a hundred fifty

thousand dollars in household income. You know, it's a it's a debate that I think that we should have, But I just feel like politically we're pretty far from getting there on a nationwide basis, and so I'm just trying to help people navigate the system as it exists. All right. So two things that somebody should do when they're working with their kids for college. I think you should start early with the savings if you possibly can, so that

you have more choices. And I think emotionally honest with yourself with your spouse if you have one, and definitely with your ex if you've got one of those UM about UM, you know, the fear that you have about the process, UM, the guilt you may have, any snobbery or elitism maybe at play UM, And that will help you make sort of clear decisions and then get everybody together, including your fourteen year old after eighth grade, and have an honest conversation about what you think you'll be able

to pay and what you might be willing to pay or borrow, and what the difference between those two things might be. Because in my reporting, that was the most interesting part of the market, where schools realized that people with the ability to pay no longer had the willingness to pay these crazy list prices, and that's where the

bargains are to be had. That's really interesting. And what type of schools are those typically, Well, you know, imagine a combined list of all undergraduate institutions in America, ranked roughly by selectivity, and so if you start a slot forty or fifty or sixty years there, and that's where

the actions starts. Because people are still willing to pay full price for Northwestern, they're willing to pay full price for Carlton College, but they're not willing to pay full price for Oberlin in many instances, and not willing to pay full price, uh, you know, for school to like it. Right, So right there, right there is the sweet spot where they're starting to throw dollar coupon seventeen year old got it. Yeah, well it's different from the reach, the target, the safety list.

That sound like you know that very well right now, Carol, Oh my god, do I know it well? Um? Ron, thank you so much, really appreciate it. Ron Labor is the Your Money columnist over the New York Times. His new book, The Price You Pay for College, an entirely new roadmap for the biggest financial decision your family will ever make. School is three or four times what it

costs me. Yeah, and like you know what I'm saving right now for a little rlow the two year old aam just designed something a child actors, so that's also worked.