Being Smart About Higher Education Expenses

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Admittedly, this review of the recently-released book The Price You Pay for College, written by The New York Times personal finance columnist Ron Lieber is biased, as I have known him for years, and I am one of the hundreds of experts and authorities he cites therein. However, don’t let my prejudice and presence in the pages discourage you. The book is one of the rare “money” publications that synthesizes facts and data with the personal and emotional aspects of helping families not only choose a college, but pay for a worthwhile education and degree without becoming eternally impoverished.

Lieber breaks down the entire ordeal in to five separate sections.

Why College Costs What it Does

In the first section, Lieber details why the price of higher education seems to have risen so much, pointing to such factors as decline in state government assistance for public universities and increasing labor costs for both public and private schools.

Then he moves on to the FAFSA and Expected Family Contribution, pointing out to naïve parents that saving money for college in appropriate vehicles will not necessarily preclude their families from receiving a boatload of “free” money. “Merit aid” is not so much of a shower of cash bestowed upon a brilliant child, but a euphemism schools use to discount the sticker price to level that will hopefully entice the student to enroll (and at least pay the discounted price).

Speaking of which, Lieber says that the frequently-discounted price of private schools is one that families should be aware of. He cites a study that says, “Private colleges and universities discount their tuition and fees an average of 52.6%” for incoming freshman.

A Little Therapy

The second section is devoted to three driving emotions that Lieber says can distort the college decision-making process and cost families money.

The first emotion is the fear that if the child doesn’t get in to the right or best school, she is doomed to a life of disappointment and poverty.

The second one is the guilt that parents might feel if they weren’t willing or able to save enough to pay most or all of the total cost of their child’s desired school.

The last emotion is snobbery (aka elitism), the notion that degrees from certain (i.e., more expensive) schools will be looked upon more favorable than others.

Lieber acknowledges the reality of these three concerns, while diminishing the importance of the first two and decrying the existence of the third.  His advice is that parents should do what they can (within reason) to pay what they can for their children’s college costs, and that the cost and sacrifice required to get a degree from an “elite” school may not (by itself) provide the desired advantage, at least commensurate to the significant expense.

Bang For the Buck

The factors that Lieber does deem valuable are listed in the third section: “Value.”

He suggests families seek out schools that provide skilled, experienced faculty who spend more time (both in the classroom and one-on-one) with students than they do on research.

Then, he dives deeply into the important extracurricular factors that should be examined, such as mental health and career counseling, amenities, networking opportunities and how effective a particular school is at boosting its students’ chances of getting into the grad school of their choice.

Lastly, Lieber points out that smaller schools and/or classes can be beneficial, but mostly if the student truly enjoys and thrives in that intimate environment, versus the relative anonymity and diversity that bigger schools and lectures might offer.

Non-Traditional Strategies

In the fourth section, Lieber addresses some “hacks” that may help students get a degree and a better education for less cost, including starting a student at community college, joining the military and vying for athletic scholarships. His general conclusions are that yes, these are ways to cut a family’s out-of-pocket college costs. But there are other potential non-monetary costs, such as the limits of only going to a school that offers the student an athletic scholarship or the years of service required by a branch of the military. Therefore, if possible, the savings should be considered as part of the overall decision to attend a school, but not the only or primary factor.

Communication Is Key

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The fifth segment is devoted to helping families save, plan, shop and borrow their way to getting a college degree for their children.

It’s one that, honestly, shouldn’t offer much in the way of new information to a financial advisor who is worthy of the title and has experience in the process.

However, the section does offer great advice on how parents can have difficult-but-necessary discussions with their children about college wants, needs and affordability.

That’s not to say that Lieber dismisses the role of a good financial advisor in the process.

He not only devotes a chapter to helping the reader find and use a financial advisor but also created a separate accompanying PDF entitled “How to Have Better Client Conversations About College” that advisors can download for free. This short document provides dozens of questions that advisors can pose to clients to help clarify the family’s goals, beginning with addressing what he believes is a crucial problem:

“People don’t stop to figure out what they’re actually shopping for,” he told me. “What is the definition of success in college? Is college about the education, the people you meet . . . or the credential?”

And the biggest question Lieber says that families need to answer is “not how to save or how to pay—it’s what to pay for college.”

Kevin McKinley is principal/owner of McKinley Money LLC, an independent registered investment advisor. He is also the author of Make Your Kid a Millionaire (Simon & Schuster).

https://www.wealthmanagement.com/college-planning/being-smart-about-higher-education-expenses

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