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DAVID GREENE, HOST:

About this time of year, many parents are out on the road with their 16- or 17-year-olds driving from college to college and thinking about the college application process that's looming ahead. Even as they scope out the dorms, classrooms and dining halls, parents and hopefully the kids too, are listening carefully to admissions and financial aid officers to figure out how to pay for school.

Now, many of these parents are baby boomers. We've been having a series of conversations on the program about boomers and the financial issues they face. And today, let's talk about paying for college. I'm joined by Ron Lieber who writes about personal finance for the New York Times. Ron, thanks for coming in.

RON LIEBER: Thanks for having me.

GREENE: Let's start with a staggering number that caught our attention. On average in the United States, students graduate from college $25,000 in debt. Is that just the reality or are there some strategies we can talk about that might avoid that?

LIEBER: I mean, that's the reality among kids who borrow. There are also a, you know, fortunate group of kids whose parents can afford to pay full freight. But among those who borrow, that number is about right. And it's been growing very quickly over the last 10 or 20 years.

GREENE: Now, there's an approach that you have talked about. It's called 20/20/20. I mean, it sounds like perfect vision but it's - what is that, exactly?

LIEBER: Sure. Well, this is not something that came out of my own head. It was actually something I picked up from a gentleman named Kevin McKinley who runs a financial planning practice in Wisconsin.

GREENE: Mm-hmm.

LIEBER: And his basic insight was that you should just divide it in chunks. And he was thinking about, you know, the $60,000 four-year cost at that time.

GREENE: At that time. Right. It's a lot more than that now, but.

LIEBER: Yeah. To put a kid through a state school in the University of Wisconsin system. And he basically looked at it like this. He said think about saving $20,000 before the kid starts, which is a reasonably easy thing to do if you do it over 18 years. Then spend $20,000 out of your current earnings during the time that your child is in college. So, you know, it may mean some big sacrifices, some very careful budgeting, a lot of rice and beans on the table.

GREENE: Right.

LIEBER: But it's doable. And then borrow $20,000. And when you start to divide it into chunks, it starts to seem at least within the realm of the possible.

GREENE: A little as daunting. But I mean, there are students and parents who are thinking about private schools today that are 50 or $60,000 each year. I mean, would you tell people who have just their heart set on these incredibly expensive schools?

LIEBER: Well, I think you have to begin by having a truly honest conversation with yourself about the emotional framework for this decision, 'cause that's where all the big money decisions start -with the emotions and feelings that govern what may be very poor choices. First of all, there's this feeling that, you know, can I or should I say no to my child who wants to go to a $60,000 a year school when they have already gotten admission to the flagship public university in our state that only cost $20,000?

And then, there's the question of, well, is it worth it? What am I getting for the extra $40,000? And would we be able to pay our own debt back if we were to support the dream of her child? These are all deeply emotional decisions. And you have to begin by acknowledging that it's feelings that are on the table first before you look at sort of hard science and the numbers.

GREENE: Is there a line that you draw where you say, you know, you can take on debt but just don't go above this number because you'll be in really bad shape in the future?

LIEBER: I think it's an easier question to answer these days for the kids than it is for the parents. For the kids, I just think it's unwise to take on any debt beyond whatever these federal student loan limits are. They're generally just above $30,000 these days for, you know, your time in college. And the reason why that is, is that there is a new system in place that allows you to pay back your federal student loans purely on the basis of how much income you have after you finish school.

So that keeps students from getting too far into the hole. If they take on an additional set of loans, the payback mechanisms and the sort of bailout provisions are much less flexible. So that's how it works for the students.

For the parents it's much more complicated, right? How old are the parents? How much money do they already have saved in retirement? Do you have the ability to earn income if you deplete your assets, or don't save as much for retirement, because you're paying $60,000 a year instead of $20,000 a year? This is where you have to start of kind of getting deep into the weeds. But, you know, it's a complicated set of choices.

GREENE: Have you seen parents have dug into their retirement and then made some bad decisions, and just put themselves in a position that really everyone should try and avoid?

LIEBER: Yeah, last year we did a series of stories in the newspaper about student debt and all of the consequences of taking too much on. And I ran across more than a handful of cases where it wasn't the students who were in bankruptcy court.

It was the parents who were in bankruptcy court or, sometimes, a grandparent or an aunt, an uncle who had signed on as a cosigner to a student loan. And then they got into a situation where, you know, they lost their job at age 58 or 62. Or they ran into a terrible medical problem and have a ton of expenses. And all of a sudden this debt was no longer affordable. And they had to go to court and basically, you know, beg a federal judge for discharge which is very, very difficult to get in a student loan case.

You know, you have to admire the sacrifices that people are willing to take on, and they think they know what the future holds. But sometimes they don't. And so, it's really important to, you know, think hard about what the worst-case scenario might be, and what it is that you're going to do to avoid it.

GREENE: Ron Lieber writes about personal finance for The New York Times, though he's on leave at the moment working on a book about kids and money that's called "The Opposite of Spoiled."

Ron, thanks so much for joining us.

LIEBER: Thanks for having me.

(SOUNDBITE OF MUSIC)

GREENE: You're listening to MORNING EDITION from NPR News.

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