Thursday, May 20, 2010

The college solution
Tom Smith

This really is the book to read if you are going through the hell of college selection and application.  Well, hell might be something of an exaggeration I guess.  Maybe something like pregnancy.  You may want to throw up a few times, aspects of it are pretty grisly, but you can reasonably hope something good will emerge out the whole painful and expensive process.  Let's hope.

As someone on the inside of the education biz, and you must remember it is a very marketing-oriented business with a product to sell, you do need to know the stuff in this book.  The exceptions are, if you are so rich you can just cut a check for $50K per year per kid, no worries, whatever, just go wherever you want honey.  In that case it's just a matter of whether you prefer Lexus, Mercedes or Escalade. Alternatively, if you are so poor and your kid is so smart you qualify for real live financial aid.  That's actually a good place to be too, because then the rich parents will be paying to send your kid to school.

But many, many people are in the middle.  And others wisely figure they want good value for their money no matter what (having perhaps earned their money in a way that makes them disinclined to waste it) and don't buy the spin that when it comes to education you should just pay whatever is asked because [cue alma mater].  At this point, it gets reasonably complicated.  It is too daunting and frankly too depressing to summarize, but what this book will do is explain the key concepts and tell you where you can find some key quantitative measures to give you a handle on such things as how selective a college is, how much price discrimination you would have to endure to send your little genius there (e.g. at the Ivies, a lot), how to tell where the merit money is, etc.  It's not rocket science, but it is at least as complicated as not getting screwed when buying a new car.  Only in this case, it's a car whose quality is difficult to measure, where reputational markets are murky yet very important, and where emotions and those who would exploit them are all around.  In other words, just plain fun.

Without passing moral judgment in any way, I will just observe it is astonishing that higher education in this country has managed to get established a system where consumers have to disclose in detail how much money they have before they are told what they must pay.  I mean Ralph's has to establish a Price Club and airlines First Class and Coach and so on, but Yale and the University of the Ozarks just have you tell them in detail every last thing about your finances and precisely how desirable your offspring is. Amazing.  And then they squeeze really, really hard.  The producer surplus they are extracting must be simply massive.  Of course, I am paid out of this surplus, so I can't complain too much.  But it has got to be just hugely inefficient.  And, just to make it perfect, it all gets justified as redistribution to help that most worthy of souls, the very smart but very poor kid from Hellovanotion, Nevada, who works 40 hours a week delousing donkeys and caring for his quadriplegic mother, while still getting 1600 SATs, a 4.6 and captaining his/her wind ensemble to international glory.  And is President of Key Club.  And yet, how much of the surplus extracted actually goes to put the poor, deserving kid through Duke?  I tend to think, probably not that much, percentage-wise.  Maybe about as much as my income taxes go to support the hard working but poor single mom who just needs a little help so she can get that community college degree and never be on welfare again.  So big emotional but relatively small statistical impact. Just expressin' a natural curiosity here.  Anyway, check out the book.

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Tom Smith


No matter how intrusive the college application process is into family finances, there are now an appreciable number of kids with parents who are relatively impecunious (thus the kid warrants financial aid) but have grandparents who are quite well off--but financial disclosure doesn't extend to them. Perhaps this is only fair, they had to shell out for their children and shouldn't have to shell out for the grandchildren. But it adds even more perversity to the system.

Posted by: PLM | May 20, 2010 11:09:26 AM

And that's just the beginning. There are quite a few other perversities you can game, depending on your financial situation. People who are seriously saving for college should read the book. Things like trust accounts count against your need, but 529s do not. And more.

Posted by: Tom Smith | May 20, 2010 11:25:41 AM

I've never understood the process. It might be because I always knew I wanted to go to Virginia Tech (which my father and grandfather attended), but I went to a community college for 2 years, then transferred and went on to law school from there.

The idea that anyone other than me would have paid for my going to school though just strikes me as strange and I don't understand why parents should have to pay for their kids' college. My parents certainly didn't contribute to mine and I don't see it as a problem.

Posted by: John Jenkins | May 20, 2010 11:45:10 AM

Don't you get tuition benefits at USD? Is the place not good enough for your little ones? ;) Really, though, the most important study might be one that seemed to show that the long-term earning potential of people who were accepted to both Penn and Penn State (not a bad school itself, it should be said, but much cheaper than Penn) was not significantly effected by whether the person went to Penn or Penn State. (Note that this was only true of people accepted to both.)

Posted by: Matt | May 20, 2010 12:56:28 PM

"if you are so poor and your kid is so smart you qualify for real live financial aid": is this custom restricted to undergraduate degrees?

Posted by: dearieme | May 20, 2010 3:58:44 PM

I do and my oldest son is going to be a proud Torero.

Posted by: Tom Smith | May 20, 2010 7:06:53 PM

I'm hoping that by the time my kids get to college age, the massive inefficiencies of which you speak (and of which I have already spoken at length) will have been largely wrung out of the system, and a high-quality, reasonably well-regarded education will be available for a price not ridiculously out of line with its actual cost--at least to those who aren't obsessed with fashion, tradition, social cachet and the like.

Posted by: Dan Simon | May 20, 2010 10:24:24 PM

Yes, colleges have learned the lesson that if they tell a good story and have a sympathetic beneficiary (the smart, hardworking, but poor student), the sheep won't dare object to being fleeced, even if that beneficiary gets only a pittance of the massive surplus.

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