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How Are Americans Really Coping With College Costs?

By Alison Southwick and Robert Brokamp, CFP(R) - Updated Oct 3, 2019 at 11:40AM

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And how is that connected to retirement savings?

We're joined by Caitlin Zaloom, NYU professor and author of Indebted: How Families Make College Work at Any Cost. Her research explores the financial and moral conflicts Americans face when paying for college.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

This video was recorded on Sept. 17, 2019.

Alison Southwick: This is Motley Fool Answers! I'm Alison Southwick and I'm joined as always by Bertie Brokamp, personal finance expert here at The Motley Fool. You know who doesn't like nicknames? Bertrand Brokamp. He does not like them!

Robert Brokamp: I like nicknames. I just don't like most of the variations on Robert, Ali Southwick.

Alison: All right, Bob! In this week's episode, we're joined by Caitlin Zaloom, author of Indebted: How Families Make College Work At Any Cost. And, Bro is going to talk about various things, so many things. All that and more on this week's episode of Motley Fool Answers!

So, Bro, what's up?

Brokamp: Well, I've got a few things, and then maybe a little bit of silliness. So let's start off here with No. 1. Get paid like it's 1999. As you mentioned, later in this episode, we're going to be talking with NYU Professor Caitlin Zaloom about the sacrifices that middle-class families make to send their kids to college. To set the table for that conversation, let's take a look at how middle-class families -- and others -- are doing these days, financially speaking. Courtesy of a couple of articles from the Wall Street Journal.

First up, an article with the headline Median U.S. Household Income Showed No Growth in 2018. Womp womp... According to the Census Bureau, median household income last year was $63,179, which was essentially the same as it was in 2017. That's on the heels of three years of some growth. This was the first time in four years that we didn't see some growth in median household income. But here's the startling thing -- on an inflation adjusted basis, this puts median household income at the same place it was in 1999. It peaked in 1999, then came the .com crash, so it went down. It started to recover again, as we recovered from the dot-com crash. Got to this point again in 2007, then came the Great Recession. Now it is finally back up to where it was -- again, adjusted for inflation -- in 1999.

In case you're curious about where your income puts you in terms of the rest of the country, again, $63,000 is right in the middle. To be in the bottom 30%, you would earn $37,000. To be in the top 30%, you have to have a household income of right over $100,000. To be in the top 10%, you have a household income of $184,000. The top 5%, $248,000. Now, since 1999, the economy has grown almost 50% on an inflation adjusted basis. The economy has grown; median incomes have not. This is a story we've heard many times before.

There is some good news. The poverty rate decreased 0.5% last year down to 11.8%. That was the first time it fell below where it was in 2007.

That's income. What about net worth? Well, here's the headline of another Wall Street Journal article. "Historic Asset Boom Passes by Half of Families." Here's the key passage from the article. Quote, "The bottom half of all U.S. households, as measured by wealth, has only recently regained the wealth they lost in the 2007-2009 recession and still have 32% less wealth adjusted for inflation than in 2003. According to recent Federal Reserve figures, the top 1% of households have more than twice as much as they did in 2003, adjusting for inflation."

Of course, in any country, wealth isn't evenly distributed. That's just kind of the way things are. However, according to a study cited in that Wall Street Journal article, the wealth gap is the largest in this country at any point since World War II. One of the big differences between the have-lesses and have-mores is that the wealthiest 1% have the vast majority of wealth in investable assets -- stocks, bonds, private companies. The bottom 50%, most of their wealth is tied to their house. That's been a difficult thing to have over the last 10, 15 years because the Great Recession wiped out a lot of the equity. For many of them, it turned them upside down, meaning they owed more, so then they lost their house, and they weren't able to benefit from the recovery.

To bring it back to our upcoming discussion about college, you can see how many families in America are struggling to pay for something that costs tens of thousands of dollars and is going up at a rate that exceeds inflation when their income and their wealth is only barely keeping up with inflation.

That's No. 1. No. 2: tweetelity. So far in September of this year, it's actually been a pretty good month for stocks. S&P, at least as of this taping, is up 3%, which is always good for any month, but particularly notable in September, because it's actually traditionally the weakest month. On average, in September, stocks lose money. But so far, we're making 3%. And it's been a pretty smooth ride, which is very different from last month. In August, the S&P 500 lost or gained more than 1% and half of the trading sessions. That includes three sessions where it lost more than 2.5%. It's the first month we're seeing three losses of that magnitude in the same month since 2011. So it was a particularly volatile month. For the whole month, the S&P 500 lost 1.8%.

What was the No. 1 reason, probably, for all that volatility? Well, it was the tweet-for-tat trade war between the U.S. and China.

Southwick: Wait, the what?

Brokamp: The tweet-for-tat trade war.

Southwick: [laughs] OK.

Brokamp: [laughs] So, to measure how much President Trump's tweets move the market, JPMorgan has created a new index. Have you heard about this now? It's called the Volfefe Index, named of course after his famous 2017 tweet where he said, "Despite the constant negative press covfefe," and that was it, at midnight.

As reported by CNBC, JPMorgan found that the index explains, to a small but measurable degree, the movements in the Treasury market, especially on the short end. According to the report, the analyst wrote, quote, "We find strong evidence that tweets have increasingly moved U.S. rates markets immediately after publication, particularly if the words China, billion, or products are in the tweets." They also had some pretty interesting stats on Trump's tweeting. Since he's been president, he has tweeted more than 10,000 times since the 2017 election. He has more tweets at 03:00 a.m. than he has at 03:00 p.m., which is a bit of a problem, because the U.S. markets are closed when this is going on. And he's presumably asleep between 05:00 a.m. and 10:00 p.m., because he has very few tweets at that time. Finally, according to Bank of America Merrill Lynch, days when Trump tweets a lot are associated with negative stock market returns.

There's really no actionable advice here, other than to say, sometimes there are risks that come out that you just didn't expect. Four or five years ago, no one anticipated the risks of the president tweeting to your portfolio. But that's where we are these days.

And No. 3. The indexers are taking over. We all know that over the long term, it's very difficult for actively managed funds to beat index funds. People have caught onto this; more people are indexing. So there used to be all these discussions about, what's going to happen if everyone indexes? But it was pretty much an academic argument, because the vast majority of assets were still in actively managed funds. However, things have finally turned a corner. According to a recent Bloomberg article, we've reached that tipping point. Based on preliminary data from Morningstar Direct, assets and mutual funds and exchange-traded funds tracking U.S. equity indexes surpassed those in actively managed funds for the first time ever last month. From the article, quote: "August fund flows helped lift assets in index tracking U.S. equity funds to $4.27 trillion compared to $4.246 trillion run by the stock pickers. According to Morningstar, investors added $88.9 billion to the index funds and took out $124 billion from actively managed funds." So the money is just going all to indexes.

What's going to happen to the markets when the vast majority of people are indexing? I think that's probably a good topic for a future episode. You can expect to see a lot more articles along those lines.

And finally, two silly things here. The journal Annals of Tourism Research -- are you familiar with it?

Southwick: Oh, longtime subscriber!

Brokamp: They decided to predict how the world might look when, according to their research, self-driving cars are in widespread use by the 2040s. What kind of activities do you think they expect to increase if you don't have to keep your eyes on the road and your hands on the wheel?

Southwick: Watching more Netflix.

Brokamp: No. Well, maybe. But, as reported by MarketWatch, quote, "People will be more likely to eat, sleep, and engage more on-the-road hanky-panky when robot cars become the new normal." Yeah, something to think about as you're driving by.

And finally, last thing. Earlier this month, police were summoned to an Ikea in Glasgow, Scotland. Do you know why?

Southwick: No. I don't know. On-the-road hanky-panky?

Brokamp: No! To provide a hide and seek game that 3,000 people on Facebook said they planned to attend!

Southwick: Oh, that's fun!

Brokamp: Apparently this is a big thing in Europe. It happens in the Czech Republic, in Australia. It happened so much that Ikea had to outlaw it in 2015. You cannot use their stores for hide and seek. According to an Ikea spokesperson, "We need to make sure people are safe and that's hard if we don't know where they are." And that, Alison, is what's up.


Southwick: Caitlin Zaloom is an associate professor of social and cultural analysis at New York University. Her most recent book is Indebted: How Families Make College Work at Any Cost. Caitlin, thank you for joining us!

Caitlin Zaloom: Thank you for having me!

Southwick: I could kick off this interview with a laundry list of stats and facts about the rising cost of higher education and how student loan debt in this country is at crisis status. Can we call it crisis?

Brokamp: It could be, depending on your situation.

Southwick: We know it's bad, but do you think people really know just how bad it is?

Zaloom: I think that's a great question! One of the reasons why I wrote Indebted is because we usually talk about student debt in these huge numbers. We know that we have now more than $1.5 trillion in outstanding student debt; more than 44 million borrowers who hold that. Those numbers are repeated again and again. But I think that we haven't really come to terms with just how deeply the high cost of paying for college has reshaped families and affects families.

Southwick: Your book is based on 160 interviews with parents and students who are taking on debt to pay for higher education. Where did you get the idea to do the research in this way?

Zaloom: I got the idea to do the research from my students themselves. I'm an economic anthropologist. That means that I study the kinds of cultural influences on the economy. I was often doing different projects. But then one day, I was sitting in my office, and one of my most promising students knocked on my door. And much to my surprise, she was in tears because she was about to graduate, which was already a surprise, but she told me then that she was tens of thousands of dollars in debt and felt that she needed to take a job that paid a lot, but was not what she wanted to do, in order to be able to pay off her loans.

Southwick: One thing I thought that was interesting with your book was that you redefined what it means to be middle class. Historically, middle class means a function of your income or your job. You define it as this special sort of purgatory when it comes to paying for college.

Zaloom: Yes. I think we need a definition of what it means to be a middle class today that accounts for the role of debt in our lives. My definition of middle class is being too wealthy or having too much income to qualify for major federal loans for low-income students, and not having enough money just to write a check for the full fare of college. In between is where families rely very, very heavily on loans and investments, if they can manage it, in order to make it work. They have to bootstrap their way through college. That's the middle classes, I think.

Brokamp: One of the points you make in the book is that just looking at student loans doesn't really tell the whole story. There's a lot of people who aren't contributing to their 401(k)s, or they're cashing out of their retirement savings, to pay for the education, because they have these dreams about what their kids' lives should be like.

Zaloom: That's right. We talk about something called the student debt crisis. Of course, focusing on the debt that young people have is incredibly important, but it really does not account for all of the pressures on families that you're mentioning. Parents have to pay for college, they have to contribute something to it if they fall in this middle-class band. And in order to meet that commitment, they do all kinds of things. They draw down whatever savings they have. They might take out a second mortgage. They might take on additional work. Of course, all of that activity is money that could theoretically be going to their own security and their own retirement. But, being middle-class parents, they want to support their kids first.

Southwick: Here on Answers, on this show, we're pretty practical people in our advice. We give advice like, "Don't put your kid's education ahead of your retirement. Start a 529 as soon as the baby is born," Rick Engdahl. And, "Contribute to it regularly."

Brokamp: [laughs] Rick eventually got around to doing it.

Rick Engdahl: You can contribute anytime you like.

Brokamp: [laughs] It's never too late, is really the point.

Southwick: Well... But, your book gets into, "OK, yeah, that's practical advice, but here's what's really happening." And it comes down to a story of conflicting morals in a way, and your obligations, if I understand it correctly. The story is that parents feel morally obligated to give their kids options and the opportunity to advance. And they want to. But college is extremely expensive. Therefore, parents are going into massive debt along with their kids to fund their education. And it's this massive moral conflict. So let's break it down, starting with how desperately parents love their children. They feel morally obligated to do everything they can to help them succeed.

Zaloom: Right. That begins very, very early on. Parents get a pair of conflicting messages very early on. As you were saying, just after kids are born, for instance, they can open a 529 account as long as they've had a Social Security number for the baby. So one message is that they should be saving if they truly believe that their kid -- who, of course, is the most wonderful person in the world -- is going to go to college and live up to their full potential. Of course, parents want that more than anything. That's incredibly important.

Now, parents are also, at the same time, encouraged to be doing everything else for their kids as well in the years where children are just beginning to learn and to learn who they are going to be, and actually even to get ready for college. For instance, parents might rent a home or purchase a home in a school district that has very good education in it. That might mean stretching their budgets to get into that school district. That's even, say, before things like sports teams, music lessons, testing, coaching, all of the other kinds of things that parents do both because they want their children to really lead full rich lives and also to get ready for college, which they're also supposed to be saving for. These things are very much in conflict. Parents feel the pressure of both of those dimensions at once.

Southwick: It's funny, because, again, listeners of our show, they hear the Bro that's like, "529s. Stay for school, go in-state, blah blah blah." But I hear the Bro that basically stays off the show that says, "I will do whatever it takes to help my kids succeed. If they get accepted to Duke, I'm going to find a way to send them to Duke. Thankfully, it didn't come to that yet."

Brokamp: It's interesting -- in your book, you point out that often, with the parents, one is being the practical person and the other one is --

Southwick: Oh, I'm sorry, you're the practical one.

Brokamp: No, no! In the end, I think it was an example, one of the families -- in the end, the dad who was saying, "No, you have to go in-state," gave in, and said, "No, we're going to make NYU work for our kid." And in the end, that's what's going to happen.

Southwick: That's totally you! That's you! When we first had our kid, my husband and I sat down with Bro, we talked about having a kid. And Bro talked about, "I'm planning to save up enough money so that they can go in-state. If they choose to go out-of-state, they can make up the difference." Is that still true, Bro?

Brokamp: We'll see how it goes. [laughs]

Zaloom: [laughs] That's very rational! The interesting thing is, sometimes couples divide those voices. They say one takes the financially strict position, and the other one goes all in on parenting values; but the truth of matter is that all of us have both of those voices in our heads. Sometimes couples just divide them up so that they can have an argument.

Southwick: OK, let's move on to the second part of our problem here. Obviously, helping your kids get through college financially, paying for college, wouldn't be that bad if it wasn't so massively expensive. In as plain of terms as possible, how did we get here?

Zaloom: There are many reasons why college is expensive today. There is just enormous arguments among experts about what the ultimate cause is. I'm just going to point to a couple of reasons without coming down on it with an absolutely definitive answer. It's everything together. On the one hand, we have public universities and colleges in this country that have gotten much, much more expensive over the last few decades. The overriding reason for that is because state legislatures have been hacking away at their higher education budgets for years and years and years. The people who run state colleges and universities have to get their operational funds from somewhere. They have to pay teachers, they have to make sure that the roofs aren't falling in, they have to make sure that there is food in the dorm rooms. And when their option is to raise tuition dollars, if they're not getting state funds, that's what they do.

Brokamp: One thing that people often will say is, part of the reason why the prices are going up is because the government is stepping in and offering all these loans and subsidies, and that allows colleges to charge higher. There's actually a name for this -- the Bennett hypothesis, from William Bennett, who was at the time the Secretary of Education, I think in 1987. But actually, there's very mixed evidence of this at best.

Zaloom: That's right, there's mixed evidence at best. I believe that it's called the hypothesis because it has remained a hypothesis, and has not transferred into being a fact.

Brokamp: Got it!

Zaloom: In addition, I would also say that over the last couple of decades, there's been another really big transformation in universities. That is the expansion of the administrative tier. There are now more administrators than ever before in universities. Ironically, at the same time, there's an increasing reliance on adjunct faculty. The faculty in general are getting paid less and less and working under more extreme situations, and there are now more administrators running the universities than ever before. And in between, there are tenured and tenure-track professors like me, who are the winners among the losers in this situation, who still make a good living.

Brokamp: If I may play the grumpy old man here for a second... my oldest daughter went to the same college I went to. In the intervening 25 years, the dorms got a lot nicer, the gym got a lot nicer, there was this big student union building that might have some educational value, but mostly it's a place for the kids to go get Starbucks and hang out. And you hear all the stories about the lazy rivers, the climbing walls. How much of that is true, in that schools feel like they have to make it more than education? It's got to be this lifestyle to attract students? And that's driving up the cost?

Zaloom: That's also one of the reasons that people put forward. Universities and colleges are also competing for students in order to move their rankings, and physical plant is part of that. Also, because the students who can pay full freight are very highly valued, because they can support the universities financially, looking to attract those more wealthy students pushes in the direction of fancy student hangout places and climbing walls.

Southwick: Have to get that sweet, sweet, out-of-state tuition money in. So, parents feel morally obligated to support their kids financially and give them the best possible path throughout their whole life. College is extremely expensive. So, finally, parents and kids are going into massive debt to fund their education. And it's easy from, I don't know, 30,000 feet -- where do we say planes are when we use this metaphor? I'll say 30,000 feet. It's easy to say, "Oh, these parents were just irresponsible. They didn't plan. They didn't stay. They probably spent their money on stupid stuff like jet skis." Who needs a jet ski? No one needs a jet ski. But the stories you share in your book are ones that people who sound very responsible, but maybe they hit hard times. There was one woman whose husband left her with an insane amount of debt. She didn't see that coming. How do you plan for that? Or, as people who never really made a whole lot of money to begin with anyway. It's easy to judge these people, but when you actually hear their personal story, you're like, "Oh, I see what happened here."

Zaloom: Right. We have a system that's built on the idea that you can plan your way out of these enormous costs. But first of all, the parents of today's college students wouldn't necessarily have been able to predict just how expensive college would be. Even if they'd been putting away money, it oftentimes doesn't cover as much as they think it's going to cover. And that's if everything is steady-state anyway. But, of course, life is unpredictable. People's husbands leave. Jobs go away. People get sick. Kids go off track. Maybe they don't go to college even though you have saved in your 529. One parent in Indebted talked about, the kid ended up dropping out of college when she's prepaid tuition. There are penalties associated with that. These programs are really designed for people who have extra money. And that's great if you have extra money. Of course, you should be using the vehicles that are available to you, like saving in a 529. But if you don't have extra money -- and most people don't -- those things can really hamper your life.

Brokamp: 529s are interesting. We obviously recommend them. I think everyone in this room probably has one. But as you point out in the book, only 3% of households actually have them. And you can take a guess income-wise where those people are.

Zaloom: Exactly.

Brokamp: They used to be tax deferred. You would start to be taxed once you took the money out. Then they became tax free. Of course, I'm very happy, since I just signed away distribution just a couple of weeks ago for my son who's in college; but, it's amazing, really, that somehow, Congress thought that was the way to do it -- to give, basically, tax-free capital gains to people who are generally already probably well off.

Zaloom: That's right. And, to direct funds to major financial institutions to manage for 18 years. As a personal strategy, if you can do it, it's great. But as a public policy, it is really, really terrible.

Southwick: In your book, you write, "In the halls of think tanks and the back rooms of legislators, the student debt problem is presented as an economic problem in need of a technical solution." But, particularly thinking about how this works in other countries, you see it as a different problem than one needing a technical solution, right?

Zaloom: Right. I think that the way that we got into this situation was as much about a political philosophy as it was about a technical fix. In the 1980s, there was a real push to start to see education as an asset like other assets, particularly that the loans would be like mortgages; the asset is like a home. And with that idea came the idea that the education students were achieving was a private benefit that paid off specifically in income. It essentially moved the reasons for education into the private domain. And once they were in that private domain, it became reasonable to think, "If an education is like a home, it should be paid for with loans, like a mortgage." That is a real shift in political philosophy. We need to start thinking about education in a different kind of way if we're really going to address the situation in front of us today.

Southwick: How do you think we should address the situation?

Zaloom: I think that there are long-term and short-term ways, and there are public and private ways. I think that we have examples of how particularly public universities can and should be funded and run and thought about that come from the history of the United States. Like the University of California system, where I am a graduate, or even in something like the CUNY system, the University System of the City of New York. There, historically, education has been either free or extremely low-cost. One of the reasons why I think that this is important is because it gives young people, even when they're in grade school, middle school, high school, a target to shoot for. They know that that education is there, and that if they really work hard and aspire and make their grades, it's going to be there for them.

When we have schools that have such incredible sticker prices, even the public colleges and universities today, that's a message. It's a message to students that those places might not be for them. In fact, we've even seen, in Michigan, an attempt to address just this. The University of Michigan was funding students from the state up to the median income for full tuition. That was there for a long time. But they were seeing very low numbers of low-income and even middle-income students applying to the University of Michigan. That sticker price was a message saying, "This place is not for you." So, they address this by essentially making a marketing campaign called the Go Blue Guarantee, which just advertised exactly what they'd already been doing. But I think that we really need to be paying attention to the kinds of messages that these high prices put out, and also the reality of the pressure that the cost puts on families.

Southwick: I think some people tend to bristle a little bit when you start thinking of college as free or cheap for everyone. They think, "Well, college is a privilege. It's not a right. You should earn your way there." What do you say to people who are like, "I don't want my taxpayer dollars going to some 19-year-old kid who's just going to mess around and study middle-age agrarian studies?" I don't know. Someone else come up with a major they don't want to fund.

Brokamp: Windsurfing was a class my wife took in college.

Zaloom: I would say a couple of things. The first is that I would point to colleges and universities as being some of the major drivers of social mobility in this country, period. And that's even true today with the high costs. But of course, we're hampering that mobility with those very costs. If we look at the University of California, again, a school like UC Irvine, they're doing amazing work moving students from lower-income families into positions to make more money, contribute to their communities in different ways, to be leaders. So I think that the public education system is incredibly important.

The other thing that I would say to that objection is that we don't ask people to pay for fifth grade, and we shouldn't ask people to pay for 16th grade. We should really be looking at what makes it possible for a young person to get an education and join the middle class. Today, that means a K-through-senior-year-of-college education. Decades ago, that was possible with a high school degree, but that's no longer the case.

Southwick: In talking to the parents and kids, you were surprised at how little they shared with each other about their actual financial situations, and how both parents and kids said that they didn't want to be a burden on each other.

Zaloom: Right. There's a well-known joke in the U.S. that Americans will talk to you about sex before they'll talk to you about their salary. We all know that families don't like to share information outside of the household. One issue that I found which was surprising in my research was that parents oftentimes did not want to share information about household finances with their kids. I call that situation nested silences. There's a silence on the outside of the household, and another silence on the inside of the household. One of the reasons that they wanted to maintain that silence was that parents who oftentimes were in a fragile position didn't want their children to move forward into college and beyond with the troubling knowledge about their parents' positions. Parents worried about being a burden, and the silence was a way to address that.

Southwick: Not effectively, though.

Zaloom: Well, it delays a reckoning.

Southwick: It's hard enough for anyone to put their kids through college, but it's even harder -- in your book, you talk about -- for African Americans. You talked about the family Ramona and Stanley Gates and their son Stanley, and how for generations back, their family has had a tougher path to college.

Zaloom: Right. One thing, when we talk about student debt as a problem for young people and loans, we're not thinking enough about intergenerational mobility. The Gates family, who really generously share their story with me, and even took me to their alma mater in Mississippi -- Mississippi Valley State University, an HBCU, a historically black college -- in the Cotton Belt in Mississippi. They started from very modest backgrounds and were able to move from Mississippi, in low-income situations, to Columbus, Ohio, and being social workers, because of their education. Now, when Ramona and Stanley, the parents, went to Mississippi Valley State, it was also very inexpensive for them. So, when their son, who was a very high achiever, as they had worked so hard to encourage him to do, when that son went off to apply and found Howard, they wanted to make that possible at any cost. That meant for them getting loans that would bridge all of the historical discrimination that they had faced. They didn't have very high incomes; they certainly didn't have any family wealth. For that particular family, they found even the loan door shut in their faces too many times. It can be really, really difficult for African Americans.

Southwick: They even went to their church and asked people in their church to help donate money to help their son go to school. They had to go ask aunts and uncles and everyone to help fund their son's education.

Zaloom: That's right, yeah. When we rely on credits for young adults to get to and through college, it reproduces all kinds of inequalities that already exist. For instance, we know that overall, African Americans have lower credit scores than their white peers. That's for all the reasons that we know so well. African Americans have been excluded from the engines of wealth; they don't make as much money in the job market. That also means that their networks are oftentimes also suffering under lower credit scores as well, so they can't necessarily just go to Mom and Dad or even a rich uncle. For instance, the Gates family looked to different members of the family to cosign on loans, but those people were also turned down. We have to really understand that credit is a function of these historical conditions that people live with every day. Good credit is oftentimes about having the privileges of white middle-class families that are too often taken for granted.

Southwick: In your book, you write, "No matter how often or forcefully experts tell students and parents that they should make college decisions based on what they can afford, ultimately middle-class families value their children's potential above all else." It's such a beautiful idea, right? We love our kids so much. We want them to have a better life than we did. But it's being paid at an insane and quite literal price. Do you have any closing thoughts for us here?

Zaloom: I think that there are a couple of strategies that people can use before we fix the major problem in front of us. One thing is to focus on helping your kid get really good grades in high school so you might actually be able to access some of the merit aid that is out there for students. I think merit aid is, again, a good personal strategy; it's a terrible overall social educational policy. But, I think personally, that's an important thing to do.

Brokamp: To follow along on that, one of the points you made in the book, it was a study it looked at the kids who were getting merit aid. A lot of these families were well off and paying much less than needier kids.

Zaloom: Yes. So, as a personal strategy, what that encourages people to do is to look at schools that aren't the reach schools. It's the schools that want higher-paying families. So, in the long run the colleges and universities that offer a lot of merit aid are looking to attract higher-paying families overall.

The second thing that I would suggest people do is to widen the lens about what kinds of schools are going to be good for their students. We all, I think, want our children to do well. That's a very, very strong impulse of parenthood. But I think that there are a lot of ways to do that. We should really appreciate that.

Southwick: Caitlin, thank you so much for joining us here in the studio! This has been really fascinating!

Zaloom: Thank you!

Southwick: Again, her name is Caitlin Zaloom, and the book is Indebted: How Families Make College Work At Any Cost.

Well, that's the show! It's recorded indebtedly by Rick Engdahl. Our email is For Robert Brokamp, I'm Alison Southwick. Stay Foolish, everybody!

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Alison Southwick has no position in any of the stocks mentioned. Rick Engdahl owns shares of Facebook, Netflix, and Starbucks. Robert Brokamp, CFP owns shares of Facebook and Starbucks. The Motley Fool owns shares of and recommends Facebook, Netflix, and Starbucks. The Motley Fool has a disclosure policy.

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