Deciding What You Want from College | Interview with Ron Lieber

0:00:20.6What is college?

Jed Macosko: Hi, this is Dr. Jed Macosko at Wake Forest University and Academic Influence. And today we have a writer, who has written a book about how to pay for college and all of the decisions that go into this. So we have Ron Lieber, coming to us today. And Ron, it is such a pleasure to have you on this little program.

I am desperate to know what do we need to know about paying for college as my kids get old enough to go off to college.

Ron Lieber: Well, you have to start by defining for yourself what college is in the first place, which may seem to be a weird question to be asking an academic, but most parents fail to stop and ask themselves a couple of fundamental questions.

As with any aspect of human endeavor, you wanna start by beginning to ask yourself, what is the definition of success in this realm, and how much success is enough, how much college. And what is college anyway?

You know, I don’t mean to turn this into some philosophy 101 discussion, but it turns out that a lot of people go shopping for this $300,000 plus thing over four years, and don’t even know what it is that they’re intending to get out of it. So what is college? College is about the intellectual roller coaster, it’s about the education, college is about the kinship, it’s the people you meet along the way, the friends and the mentors. And it’s about a credential, and maybe it’s a baseline credential that allows you to establish yourself firmly in the middle class, if your parents were not, maybe you’re a low income first generation student. Or maybe you want a fancy nameplate degree that will open doors to rooms, to institutions, to companies, to places that your family never could have gotten you entrée into without the gold-plated degree. And so until you know which of these three things or all three things and in which proportion you’re shopping for, you can’t even begin to define what value means or what you should spend.

Jed: Yeah, so a typical student who got As and Bs in school, is not going to get into one of the really gold plate institutions, so it’s not even an option for them. So it’s a little bit more difficult when the world is your oyster and you can get into any school you want, maybe you’re a sports recruit with a 1600 SAT.

What do you do then? Because now it’s just, Well, how much money do I wanna spend? How much of my parents money, my future inheritance do I wanna really put on the line here. And what kinds of things would make you wanna pick that most expensive education? What would cause you to choose that?

Ron: Sure, so let’s start with the education. I mean, to my mind, all three of the things, the education, the kinship and the credential need to be in ample evidence in order for anybody to be willing or anybody with the ability to pay 300,000 to have the willingness.

So if you start with the education, I want access on behalf of my kid, to professors who are full-time instructors, they are not adjunct instructors who are having to hustle around three states over the course of five days for a living. They are not graduate students who are using my children as guinea pigs.

I want full-time instructors who actually want to be in the classroom and who don’t hate teenagers, because as you know, when you talk to academics when nobody else is listening, there’s often a sort of competition and a pecking order about who doesn’t have to deal with the grungy undergraduates and only gets to work on their research or train graduate students. So I wanna be at a place where they actually care about the teaching, where they actually care about teenagers.

So that’s number one, number two on the kinship side, the best qualitative measure of this came from a friend of a former colleague who happened to come hear me speak several years ago, and they had been best friends for 55 years since they were roommates as undergraduates.

And he came up to me afterwards and he said, You know, he said the thing about college was that in college, I met the kinds of people I made, the kinds of friends I never could have imagined having existed in the world. That’s what you want.

So that’s a qualitative measure, but how do you get it at a quantitatively? Well, the kinds of people who you can never imagine having existed in the world are probably more than a little bit different from you, so where are you going to go to school, to live with, to be in a classroom with people who have viewpoints and backgrounds and perspectives that are somehow different than yours, so the line of inquiry starts there.

And then also when it comes to kinship, you want a mentor, there’s not very much research that’s been done on undergraduate outcomes and what makes for a satisfied, happy, 25-year-old with a bachelor’s degree.

But one thing we do know is that the people who are happiest have often had mentors as undergraduates. So you wanna ask an institution, point blank, what are you doing to encourage to nudge a faculty members and other administrators and the undergraduates into forming these kinds of Mentor-mentee relationships. What do you do actively, other than forcing everybody to have office hours, to make it happen.

At Hamilton College in Hamilton, New York, they reimburse professors for all of the groceries they buy when they have their students over for dinner, they actually did a study on this and found that even one dinner at the professor’s house can make a profound difference in your satisfaction as an undergraduate and even in your grades, right. So that’s the kinship.

And then the credential. That’s a trickier one. On one hand, yours may be a family that is looking to get your kid into a recession-proof industry. Maybe it’s Computer Engineering. Maybe it’s nursing, right? And you don’t necessarily have to go to a 300,000 school to do that.

But maybe you have a 17-year-old on your hands who wants nothing more than to go to work on Wall Street, and not just any Wall Street firm or not any Wall Street program, they wanna be an analyst at an investment bank at one of the elite Wall Street Programs. So I’ve got news for you. Goldman Sachs, not really hiring from NC State. Hiring from Wake, maybe. Hiring from Duke, probably. Hiring from Princeton, like dozens of people.

And so if you’re gonna have to pay up for one of those institutions more than another, and all your kid wants is to go to work at Goldman Sachs and be on Wall Street. Well, then maybe it might be worth it to you if you don’t have to go that deep into debt and you have the money available. So much depends on the point of the exercise and of course, the resources at hand.

Jed: So let’s talk about that credential, ’cause that is the piece that I think may distinguish between the really expensive and then the not as expensive schools. We know that the last five presidents, until the most recent one, have all gone to Ivy League, top flight universities.

Is it true that over the last couple of decades, it’s become more and more important that you have that gold-plated credential, or has it been about equal from time immortal in the United States?

Ron: Well, here’s the thing that we don’t know: Are people made at these Ivy League institutions or did they already have the ability innate in them when they got there to end up sort of launched into the stratosphere, however you define it.

Whether it’s becoming a Fortune 500 CEO or a baseball general manager, or as somebody who gets a whole bunch of venture capital money or wins a MacArthur genius grant. It is true that at all of those places, all of those destinations, and it is also true about the New York Times newsroom and The Wall Street Journal newsroom, that a way disproportionate percentage of the people who achieve these measures in life come from the 45 most selective institutions in the country, or the ones with the highest average SAT score.

But let’s think about what that says, because those SAT scores are achieved before they get to the institution. So why does that happen? Well, they are born brilliant or they are extremely privileged, and their parents have been able to buy them a lot of SAT tutoring.

And with that privilege often comes connections an entrée into the kinds of entry level jobs that can allow you to become the General Manager of the Boston Red Sox when you’re 38. Or can allow you to find your way through a friend of a friend to the front door of Kleiner Perkins to get your venture capital money for your start-up.

So is that happening because of Princeton or is it happening because these kids were already so amazing. I mean, I think the answer to that question is, yes, it is both. It’s probably a little of both.

But not everybody wants to be a baseball General Manager, not everybody wants to be a senator, not everybody wants to go to Goldman Sachs. This is like a teeny, tiny sliver of the 1%, and it’s easy for people to kind of get obsessed with these amazing stations in life that you might get to, and the fact that maybe the odds are a little bit better if you’ve come from a really selective prestigious institution.

But everybody else in America goes and does completely different things and can easily achieve the same or higher level of both happiness and income, doing all sorts of stuff. And a Princeton degree is not required for all of those other 99% plus things.

And so if you have a kid on your hands who is absolutely sure that they wanna go do one of these things where there’s a lot of Ivy leaguers running around, then yeah, you know what, the odds might be a little bit better ’cause they’re gonna be rubbing shoulders for four years with other people who are gonna be going to do those things or whose parents did those things. But for everybody else, which is like the vast vast vast, vast, vast majority of people, you probably don’t need to pay $300,000.

0:11:10.3Paying for college

Jed: So your book is essentially an argument for people that unless they’re sure about their kid wanting these great aspirations and really top echelon aspirations and really sure that they want those top of echelon, it’s better to just go with something cheaper and that’s your advice for paying for college, is that how it basically based on?

Ron: Well, I mean define better, right? Because another way to think about this is that College, a private college or university at the rack rate at the retail price has become something akin to a luxury product.

There are all sorts of people who can’t afford it, and we’ve decided that that’s okay, but 7 or 8 or 9% of the American population actually can, in the same way that 7 or 8 or 9% of the American population can afford to go to the four seasons on vacation. There’s nothing wrong with the four seasons, it’s not a sin to like nice things in the same way that it’s not a sin to want to provide the best possible education for your kid.

And if you’ve decided that Northwestern University at the full price, because Northwestern doesn’t offer any merit aid based on your ability, only need-based aid. If you’ve decided that joining a fraternity and living in Evanston, Illinois and being a journalism undergraduate despite the low wages on the back end, if that’s gonna provide you that the best possible kinship and the access to the very best journalism instructors in the country, and a credential that will actually mean something in newsrooms, and you’ve got the $300,000. Bless you.

What’s wrong though, is that if you don’t ask the questions in the first place, if you haven’t framed the questions around value and around intent and around the definition of success, then you’re doing it wrong, and there’s a pretty good chance you will waste money.

0:13:15.0The Price You Pay for College

Jed: So you’ve taken a long time with this book, what has it been seven years that you have been working on this project?

Ron: I had an inkling eight years ago that this was, that this was gonna be the next thing. I was in the middle of another book then, and it began to take shape then, and it took me a couple of years and a lot of really smart readers to help me sort out what it was that it was supposed to be.

Jed: And the reason you were so excited about writing this book and really wanted to write it is because you felt like so many people don’t ask those questions before they go shopping for a $300,000 item. And that’s what you wanted to try to stop as a service to humanity, at least in the United States. Just say, Hold on a second, guys. Let’s ask the questions that are really important here.

Is that what was motivating you?

Ron: That’s what started motivating me three years ago, but what I figured out five years ago was something else, ’cause I had this giant pile of material and I knew that the college thing just loomed so large. And there were a lot of college books and a couple already really good college money books, but there was something gnawing at me and I couldn’t figure out what it was.

And then it finally clicked in for me, because there are a whole bunch of people who didn’t understand the system, and I was worried about them. And there were a whole bunch of people who had kind of woken up to the system of discounting, and they came to me quizzically and said, "Ron, here’s what’s happening here. We live in Raleigh, North Carolina. My kid is into Chapel Hill. That’s gonna cost us a little less than $100,000. My kid is into Wake, Wake’s gonna cost $300,000. We didn’t qualify for any need-based aid. And then cross the border, the University of South Carolina is throwing all this money around at smart kids from my state, and my kid could go there for $200,000 with a little bit of a merit aid.

And so your newspaper keeps insisting that we live in the era of big data. So can you just point me to the data set that explains why USC is $100,000 better than Chapel Hill would be. Or why Wake is $200,000 better than Chapel Hill and $100,000 better than SC.

And I thought, no. I can’t do that. Where’s that data? What’s going on here? And for all of the ink that I had spilled for years at the Wall Street journal on The New York Times, trying to figure out how to save for college, or how to pay for college, or how not to pay for college with too much student loan debt.

I had failed to ask the most crucial question of all, which was what to pay for college? What I was looking for, what I had yet to pound into my thick skull was that this was a value question. And when you’re asking a value question, you’re only one letter of the alphabet away from values questions. And then you’re into money and you’re into feelings, and you’re into all of the complex emotions that are involved with any large financial decision, and that’s where I like to muck around.

Jed: That’s a great place. So just to get clear, eight years ago, you thought about writing the book. Five years ago, you realized this connection between value and feelings and that you had been asking the wrong question all along. And three years ago, you decided that this would be almost like a public service to help people ask themselves the right question.

So that’s kind of the trajectory of how you wrote this book?

Ron: Pretty much. I had to figure out what the map was, what the map was, or what the reporting map was for me, and then what the blueprint was going to be for readers to kind of walk them through in a logical fashion, to get them through all of the things that they needed to know to ask better questions and make smarter decisions.

Jed: So this was not a book about how to use clever accounting principles to hide your money from the FAFSA people or about what accounts to put your money in to save up for this, and it’s really just about how to decide how much to spend, and right essentially?

Ron: That’s a big part of it, but part five of the book is all about how to make a plan. So there’s 15 years of personal finance wisdom that’s been sort of distilled into that section.

So there’s a lot of nuts and bolts in the back about how to decide how much to save and how 529 plans work, and whether and how much to borrow, and so all of that stuff is explained as well, and.

Jed: That’s great, but the main reason you wrote the book was to help people first to decide what they really want.

Ron: Yes. To try and figure out what was gonna be important for them, and to figure out how to ask the right questions of these institutions, to determine whether the value was there based on the things that the family cared about the most.

Jed: Yeah, fascinating. Well, we’re so glad. Now, the book that you were writing when you thought, I need to write this book about money and college, was that the book about unspoiled, and was there a connection between that book you’re writing and then the idea to start writing this book eventually.

Ron: I think there is a connection. I mean, the logistical Connection, was not that interesting, and when I started The Opposite of Spoiled, which was all about how and when and why to talk to kids about money and what to say when you do.

I knew that I had to stop at a certain age. And it became clear very early on in the reporting process for that book, back in 2013, that the college thing just loomed so large that it really needed to be hived off on its own. And so I knew that book needed to stop at age 16, but that book was very much about how family conversations about money are also family conversations about values, because when you’re talking about value, it’s only one letter of the alphabet away from talking about values, and when you give kids allowance and you divide it up into a save jar and a spend jar and a give jar.

Well, think about all of the character traits we wanna teach them, saving is about patience and perseverance, and giving money away is about generosity.

And spending money that’s about modesty and prudence and thrift, and these are all things that we want our kids to be and to do so money turns out to be a great way to teach that.

And what we’re really doing, as I discovered at the end of that reporting process, we’re trying to introduce kids starting at age four up to 16, to ever larger dollar amounts, both in terms of giving them the ability to practice spending their own money and introducing them to line items in the family budget. To get them ready for this insane six-figure expenditure that’s coming at the family at age 17, for which we want them to be ready, we want them to have context, to understand what such a large amount means, both to the parents and also to their future, if they’re gonna be borrowing for it.

And you can’t do that successfully, if you haven’t been having at least a decade of money conversations before the college conversation even starts.

Jed: But somebody’s gonna buy your book and say, You know, I haven’t been talking to my kid about money, they’re already 16, 17 years old. What do I do Ron?

Is there a part of your book that helps them walk through that?

Ron: There isn’t exactly. And if I have a repertory, a blind spot, it’s that I assume everybody is coming in sort of above average on the parenting money education front.

But if that hasn’t happened yet, that’s fine. And one of the things I do encourage people to do in the book, is that if you’re contemplating taking on a whole bunch of debt or having a child be responsible for anything above and beyond the federal student loan limits, which are roughly $30,000 and change.

So not so much that a person with an entry-level job would not be able to pay that off. If you’re contemplating taking on additional debt and making your child responsible for it, you should go through the actual budget exercise of figuring out where they think they might like to move some day, tracking down the rents in that place, thinking about what an entry level salary looks like in an industry that they’re interested in in that city or in that place.

And then making an actual budget so that they understand what their life would actually be like how many cans of rice and beans and bags of ramen they would be opening for years if their student loan payments are 600 instead of 400 or 400 instead of 200. So that’s an education.

0:22:24.3There’s no magic algorithm

Jed: Wow, yeah. That is an important, important conversation to have. Now, your book is a great public service, as I’ve been saying to the United States, to people who are going to go off to college or send their kids off to college.

Is there something you wish that somebody else would make that would also help in that effort something like a calculator for students to use to say, Here are the 30 schools I’m thinking about applying to, which 10 of them are the ones that I could actually afford, so that I don’t bother applying to all of them, I just apply to the ones that I can actually pay for?

Ron: Yeah. So a couple of things about that, I had hoped to create some kind of magic algorithm on my own where everybody could feed in their own individualized data and it would present to pay no more than $52,000 for Duke University, but definitely not 70. I had hoped that something like that would emerge. It doesn’t exist. There’s too many variables. And when it comes to just being able to predict on the front end what these places will cost, it’s still sort of amazing to me, the gall of a system that requires you to apply for admission, wait for admission, and then and only then do you find out what sort of financial aid you may have been awarded.

Now there are these things known as net price calculators that you fill out one by one by one to get a sense of how much need-based aid you might be awarded. But there are no meta-calculators where you just put in all of your information just once, and then you get a price quote, and maybe it’s not completely accurate, but you could get a price quote for 15 schools and with merit aid quotes based on whatever last year’s data was with a disclaimer saying, it might be different this year, just to kind of get you in the ball park. This is all too...

Jed: Wouldn’t that be great? Wouldn’t that be great? It doesn’t exist.

Ron: It doesn’t exist. This is all too complicated, it is not the fault of parents who are throwing their hands up in exasperation, and by the way, it’s not the fault either of well-meaning financial aid administrators and admissions officers who inherit this blasted system and themselves wish that they could blow it up and build something better.

But this thing is a beast. It’s enormous, there’s a couple thousand undergraduate institutions, a couple million people applying each year, all sorts of federal regulations, state legislatures on the public side getting in your way, boards on the private side, and when billions and billions and billions of dollars of money sloshing around, it’s not that easy to turn this around and make it better.

And so, for better or for worse, I wrote a book that was gonna help people do better in the system as it exists, and somebody else is gonna have to write the manifesto that will convince everybody to blow it up.

0:25:25.8Could the US government help?

Jed: Well, even before they blow it up, is it something that the United States government could do?

After all, they have IPEDs and every university has to send in information about that, and as you mentioned, you can go to each university’s website and do a net cost calculator, one by one, so the information is out there on the internet. Could the government say, we’ve got to bring all those together into one place where you put in your information one time and you see all the schools that are in your price range.

Could the US government do that? And would it be worth it? Do you think?

Ron: Yes, and yes. And who might object to that beats me, but a bill has been floating around congress for a while now that would force the creation of that very thing, it seems so utterly sensible, so utterly sensible that Congress hasn’t done it.

Jed: Too bad. Well, if the US government doesn’t step in, is there a way that clever computer scientists can mine that data off the websites and somehow maybe legally or even in a bootlegged manner, get the information and release it somehow to the world in a clandestine back room where people know all, oh the universities don’t sanction this, but it works, it tells me what I’m supposed to be paying for each of these schools.

Do you think that could happen? Is that more likely than the US Government getting...

Ron: It already happened several years ago and a whole bunch of schools blocked the service.

Jed: What was that service? Did it come out of Wellesley or was it a different...

Ron: Well, no. The Wellesley calculators is something that the schools approve of and invite in, it was a woman named Abigail Seldin who put it into place, and I am now going to forget what it was called, but I was so...

Jed: It’s okay, I’ll find it. I’ll find it. Abigail Seldin. I’ll find it and why it got shut down.

Ron: Abigail Seldin. I was so angry about what was happening that I wrote about it twice just to try to needle the institutions that were blocking her. And it got kind of complex, but basically what the institutions that were upset were saying was that this could place too big of a burden on our website with her website pinging our website and the questions that she’s asking on the front end to attempt to universalize, the data input don’t quite match with our questions, and therefore there’s a possibility that the wrong data will end up being scraped or put into our robot by their robot, and we just can’t allow this.

But what they really don’t want, they don’t want people making comparisons on the basis of price, they want to control the pricing, the framing, how it looks on these financial aid award letters, each of which is different from the one that came before.

And the result is a bunch of people, including people who are in the academy themselves, scratching their heads trying to figure out how the hell this works.

0:28:41.8Sign off

Jed: Exactly. Well, we are so glad you’ve shed some light on it, given us a little taste for what really is the most important question, asking what we value and what we’re trying to get out of the system, but also a little light on what’s broken about it and how it could be fixed if things were perfect and people would take some action.

Ron: Yeah.

Jed: So thank you so much, Ron, for spending the time with us today. We were so blessed.

Ron: Oh, it’s my pleasure. Thank you for having me.