Your Money Matters: 'The Price You Pay For College'

Sending a child or grandchild to college is a huge financial commitment for most people. If you have multiple children, it can seem overwhelming. News On 6's Dave Davis discussed this with Ron Lieber, personal finance columnist for the New York Times and author of the book "The Price You Pay for College".

Dave: You were in town to visit Memorial High School. How did that go?

Ron: It was fantastic. An organization called Charger Pride, a nonprofit that helps students get to and through college from Memorial, invited me here. I spoke to a couple hundred kids in the auditorium, answering their questions to be as helpful as I could.

Dave: Great. I also want to mention that this book isn’t just for parents with kids in diapers—it’s for families at all stages, right?

Ron: Yeah, it's important to start from the very beginning when your kid is born. You know, 18 years might seem like a long way away, but this stuff is expensive. It's good to have a plan and think about how, or if you might want to start saving. Also, just to get a sense of how the system works, because it's complicated. It's not your fault, but it is going to be your responsibility to sort it out.

Dave: And this book goes through all of it, something that jumped at me early in the book, is you talk about college costs and why it costs so much, and in this passage, "But the biggest cost of all, you say, one that every undergraduate institution faces, whether it's public or private, is labor.

The majority of money that goes to educating undergraduates goes for salary for the people who teach and the staff who support them." Does that surprise people when you say most of it goes toward labor?

Ron: Sometimes it does. Think about it this way, the people who work at colleges and universities are often incredibly well-trained. Right? Administrators have master's degrees, maybe they have PhDs. A lot of the teachers, the instructors, the professors, they also have PhDs. You got to spend two or four or six years getting that degree.

So, if you're going to spend that much time in grad school, you know, just basic labor economics tells you that you're going to expect to be rewarded for that, right? Those people earn above-average salaries, and you need a lot of them to create a good, intimate classroom experience, to have career counselors, people working in mental health, all that sorts of stuff. So, you know, it takes a lot of people to run a good university.

Dave: What inspired you to write a book this comprehensive? It’s incredibly thorough.

Ron: Part of it was personal. I have a daughter in college and a fourth grader, so I was trying to figure out how much to save and what success looked like. But New York Times readers were a big part of it too—they kept asking not just how to save for college, but how much to pay. When should you spend beyond community college or an in-state school? I felt there weren’t enough resources out there to answer that.

Dave: You tackled it well. The book’s called "The Price You Pay for College" and is available now everywhere books are sold. I noticed your "fraction method," where you divide savings into manageable chunks. Can you explain that?

Ron: If you think the maximum cost of a state university will be around $100,000 out of pocket if you don’t qualify for any discounts or scholarships, that’s a big commitment—$25,000 a year. So consider saving 25% over the first 18 years of the child’s life, which you can manage with about $100–$150 a month if it’s well-invested.

Then, while the child is in school, you’d be spending around $6,000 a year out of pocket, out of your day job income. Maybe you’d need to sacrifice or budget a bit, but that’s doable for a fair number of people.

Then, you could consider borrowing the rest. An undergraduate can borrow up to about $30,000 from the federal student loan program at favorable rates, so they could take care of $25,000 of that. Parents might also have home equity or government loan options, which they can pay off with side hustles or extra work, making the plan more manageable.

Also, don’t forget, that kids can work during college and summer. A student can earn $15,000–$25,000 over four years, so parents might not have to borrow at all.