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Paying for college may be the biggest financial decision a family will ever make. Yet, as a financial advisor, I’ve had more people ask for my advice on how much to spend for an engagement ring than on how much to spend for college. It’s illogical but not surprising. We focus on the belief that we need to give our kids and grandkids “a better life” by funding their college education, and we (including me) tend to ignore one of the most important pieces of the equation: the price you pay for college.
For years, I’ve advised parents and grandparents how to save with 529 Plans. I’ve also guided families and graduates about repaying student loans. But in between saving and paying off debt, I haven’t offered much information. Then, in December, my eldest grandson Elisha was granted early acceptance to his top-choice university, and I took a closer look at the true price of college. Like many others, this grandparent wants the best for every one of my grandchildren—including an excellent education. And I’m willing and able to invest in that outcome. But as an investor, I want to be financially smart throughout the whole process. So when I saw that one of my favorite financial journalists, Ron Lieber, was publishing a new book on the topic, I pre-ordered it immediately and downloaded it the day it was available. I spent last weekend reading The Price You Pay for College: An Entirely New Road Map for the Biggest Financial Decision Your Family Will Ever Make. If you have any college-bound students in your family, this is an essential book for you to read! It was for me.
Lieber writes that the process of choosing and paying for college is “designed to sow maximum confusion” and that the purpose of his book is to bring clarity and a sense of control to that process. To do that, he guides the reader through every step: saving, planning, researching, touring, applying, negotiating, and borrowing. In my opinion, he does a fantastic job. Here are the key takeaways that anyone choosing a college needs to know:
The price of college is negotiable.
Yes, really! While most of us believe that the institution fixes the price tag of college education, the truth is that these are just the ‘rack rates’ (my words, not Lieber’s). Did you know that only 11% of US students pay the listed tuition at any university? The other 89% of students receive some discount—through merit awards, needs-based scholarships, or other types of financial aid. Despite what the FAFSA (the Free Application for Federal Student Aid) may tell you, there is no set-in-stone formula that dictates how much aid a student receives, and most parents don’t fit the FAFSA mold. Divorced? Negotiate. Had a “change in financial circumstances”? Negotiate. Lieber shares how to identify the many available discounts and negotiate your personal (and likely much lower) price tag.
Colleges work hard to ‘optimize’ price discounts.
Schools pay consultants small fortunes to come up with formulas to help them strike the right balance between what a student can pay and what they are willing to pay—and college admissions and financial aid application processes are designed to find that sweet spot. Choosing ‘early decision’ at that #1 choice may boost your student’s chances of being admitted, but it also tells that school that you’re willing to give up your bargaining power on price. Knowing the rules of the game can help you optimize the price you pay rather than simply paying the university’s ‘rack rate.’
Choose based on what’s right for the student.
Universities are great at marketing—especially Ivy League schools that have maximum pricing clout. But that doesn’t mean an expensive Ivy League is the right choice, even for students that are honored with an acceptance. Lieber’s book includes a ton of worksheets to help you pinpoint which aspects of the college experience are worth your money. The answers will be different for everyone. For some, a 4-year residential program at a top-name institution may be ideal (the author attended Amherst and cites many reasons why he was happy with his choice). Others may find that attending a community college for two years and then transferring to a larger school is the right choice, or that a gap year or a stint in the military is the best path toward their goals. The worksheets can help you and your student navigate this maze of decisions using facts, not emotions, to make the best possible choice for your student and your personal finances.
Back in 2015, I wrote about Ron Nelson, a high school senior who turned down offers from all eight Ivy Leagues (and the heavy student-loan debt that came with them) to accept a full ride at the University of Alabama. He is now a debt-free medical student at Columbia. As Lieber points out, most of us carry a lot of baggage into the process of choosing a college. Fear of letting down our kids. Guilt that we’ve failed by not having the resources to foot the bill. Shame that we failed to have ‘the money talk’ and to make cost part of the equation. All these feelings are intensified by the burning desire to give our kids a leg up on their future.
If any of that rings true, or if you’re anything short of an expert on the daunting process of saving, planning, researching, touring, applying, negotiating, and borrowing for college, buy The Price You Pay for College: An Entirely New Road Map for the Biggest Financial Decision Your Family Will Ever Make today. Whether you’re a parent, grandparent, or student, if you’re facing a college decision in the months or years ahead, this book is the best $20 investment you can make. What is the right college choice for the student in your life? How can the price of that choice be negotiated to reduce the financial burden for your family? Lieber can help you find the answers.
Related: 6 Ways a Financial Advisor Can Improve Your Return on Life!