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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: More than three decades ago, not A Raja Viswanathan was

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Speaker 2: a student in India hoping to get a graduate degree

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Speaker 2: in mechanical engineering in the United States.

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Speaker 1: I applied to a bunch of schools in the US

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Speaker 1: for my graduate studies from India and I got admission

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Speaker 1: into one of the Californian schools, actually to Stanford University.

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Speaker 2: Not A Rajan got what seemed like the opportunity of

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Speaker 2: a lifetime, but then came the price.

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Speaker 1: Tag for graduate studies. They said, all told, it will

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Speaker 1: come to fifty two thousand dollars, and at that time

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Speaker 1: it was more than our house itself. So even if

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Speaker 1: my father sold off the house and was prepared to

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Speaker 1: live in these streets, it would not be possible for

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Speaker 1: me to attend.

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Speaker 2: His family couldn't foot the bill. So not A Rajan

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Speaker 2: chose a more affordable path. He got his Masters from

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Speaker 2: the University of Maryland and later an MBA from the

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Speaker 2: University of Michigan, two state schools, and for the last

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Speaker 2: thirty three years nat Rajan has lived in the US.

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Speaker 2: He and his wife raised their family in the suburbs

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Speaker 2: north of Los Angeles, today, he says, their after tax

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Speaker 2: take home pay is about one hundred and eighty five

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Speaker 2: thousand dollars. When it came time for their two sons

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Speaker 2: to go to college, they wanted to be able to

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Speaker 2: provide them every opportunity, but they'd also decided early on

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Speaker 2: they didn't want their sons to go into debt to

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Speaker 2: pay for college.

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Speaker 1: For graduate studies, I can understand taking out a loan,

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Speaker 1: but for undergrad I want them to graduate loan free.

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Speaker 2: But both boys had a prestigious and expensive private school

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Speaker 2: high on their lists, the University of Southern California.

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Speaker 1: We kept an open mind, saying, if you get in,

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Speaker 1: then we will consider definitely. But because it is a

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Speaker 1: private schools how are we going to pay for it?

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Speaker 1: Was the question which was always lurking in the back

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Speaker 1: of our minds.

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Speaker 2: Their older son wasn't accepted to USC. He ended up

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Speaker 2: going to UCLA last year. Their younger son, Ayush, got

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Speaker 2: some news.

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Speaker 1: So he called us on the phone and he was

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Speaker 1: all excited and he said, diamond and I'm in. Of course,

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Speaker 1: there was a packet which I've been mail after that.

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Speaker 1: I still have the letter.

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Speaker 2: That acceptance letter also contained other information that not a

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Speaker 2: Rajan says, dampened their excitement pretty quickly when.

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Speaker 1: We saw that the estimated tuition plus living expenses came

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Speaker 1: to around ninety seven thousand dollars per year. Then we

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Speaker 1: knew that it was not something that we could accomplish

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Speaker 1: on our own, so it would be more than roughly

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Speaker 1: around fifty five percent of the tekon PI.

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Speaker 2: The school did offer Ayush some financial aid five thousand

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Speaker 2: dollars a year.

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Speaker 1: But ninety two to ninety seven thousand I didn't see

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Speaker 1: much of a difference.

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Speaker 2: The family appealed, explaining that their older son was in

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Speaker 2: medical school and between his living expenses and what USC

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Speaker 2: was going to charge for Aush to go there, the

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Speaker 2: family would end up spending seventy percent of their take

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Speaker 2: home pay on the boys' education. But no luck.

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Speaker 1: We had probably around five ten minutes of conversation at best.

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Speaker 2: So not A Rajan and his wife began running the

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Speaker 2: numbers to see whether they could pay for USC. Ayusha's

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Speaker 2: college savings account certainly wasn't going to cover it.

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Speaker 1: Now.

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Speaker 2: Arajan took out a loan on his four oh one K,

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Speaker 2: but that's still wasn't going to be enough, they wondered,

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Speaker 2: what more they could do. Could they sell their home,

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Speaker 2: maybe move to a less expensive state. And as the

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Speaker 2: cost of college rises, middle class families all over the

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Speaker 2: US are asking these kinds of questions. I'm David Gera,

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Speaker 2: and this is the Big Take from Bloomberg News Today.

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Speaker 2: On the show, an exclusive Bloomberg analysis of the real

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Speaker 2: cost of attending the most selective colleges and universities in

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Speaker 2: the US and while staying in the state might not

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Speaker 2: be the most affordable option. Bloomberg's Paulina Ccerro and Francesca

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Speaker 2: Maglioni have been looking at the rising cost of higher

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Speaker 2: education in the US and what it means for students

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Speaker 2: and their families. Francesca says colleges and universities typically announce

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Speaker 2: what they call their sticker price around this time every year.

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Speaker 3: What they look at is their tuition costs and additional

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Speaker 3: fees like books, room and board and things like that,

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Speaker 3: and so they call that the cost of attendance or

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Speaker 3: the sticker price. That number nowadays is ninety five thousand

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Speaker 3: dollars for some colleges, one hundred thousand dollars for others.

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Speaker 3: That price kind of scares a lot of people when

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Speaker 3: they see it, and colleges are always adamant about telling

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Speaker 3: people that with financial aid, most people don't actually.

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Speaker 2: Pay that what percentage of students end up paying that

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Speaker 2: full sticker price.

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Speaker 3: In reality, half of students pay that price. That's still

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Speaker 3: a lot of people. Well, when you're talking about ninety

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Speaker 3: five thousand dollars at some of these schools, when.

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Speaker 2: You look at that sticker price, how do these colleges

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Speaker 2: and universities justify the cost being as high as it is.

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Speaker 3: Colleges will say inflation has made the cost go up.

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Speaker 1: For sure.

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Speaker 3: COVID wasn't easy for these colleges as well, and they'll

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Speaker 3: say that that's what it takes to educate their students.

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Speaker 3: The way they justify the price is through financial aid.

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Speaker 3: That's how they say, we have these wealthy students that

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Speaker 3: can then help us educate these less wealthy students. But

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Speaker 3: they're reaching kind of a breaking point where even the

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Speaker 3: students that are considered wealthy in the college's eyes don't

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Speaker 3: feel like they can actually afford to pay that big

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Speaker 3: sticker price.

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Speaker 2: I also asked Paulina how colleges and universities determine how

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Speaker 2: much financial aid to offer.

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Speaker 4: So when students are applying for financial aid. Everyone uses

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Speaker 4: the application for federal aid culture. I remember that, yes,

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Speaker 4: So basically what happens is families put in information about

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Speaker 4: their finances, how much money their parents make, are they

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Speaker 4: from a home with parents that are together or divorced,

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Speaker 4: your home equity, any investments that you might have, to

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Speaker 4: try and create a picture of what this family's income

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Speaker 4: looks like. And then the fastest spits out a score

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Speaker 4: called the student eight index and gives that to schools. However,

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Speaker 4: different schools have their own financial aid offices that calculate

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Speaker 4: how they distribute aid in very different ways. And beyond

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Speaker 4: you know the different forms, each school has their own

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Speaker 4: formula for determining what family gets how much aid.

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Speaker 2: There are all sorts of tools that help students and

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Speaker 2: families figure out how much college will cost. Paulina and

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Speaker 2: Francesca took two of them, a calculator called my Intuition

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Speaker 2: and another called Meadow, and use them to show how

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Speaker 2: financial aid gets distributed.

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Speaker 4: Readers can go to our story and you can select

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Speaker 4: your income. We have eight income profiles ranging from seventy

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Speaker 4: five thousand dollars to four hundred thousand dollars and see

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Speaker 4: the college is stacked up against each other and how

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Speaker 4: much you would pay after financial aid and get arrange.

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Speaker 2: So you look at it more holistically, So who's benefiting

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Speaker 2: from financial lad or getting most of it? And what's

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Speaker 2: the point at which it begins to kind of diminish

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Speaker 2: or go to zero.

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Speaker 4: Basically, when you make seventy five thousand dollars household income,

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Speaker 4: you pay around ten percent of your income towards college costs.

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Speaker 4: But then once you hit one hundred and fifty thousand,

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Speaker 4: you start paying twenty percent of your total income. And

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Speaker 4: families making anywhere from two hundred thousand to four hundred

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Speaker 4: thousand are expected to pay the same financial burden. So

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Speaker 4: that's like twenty percent across the board.

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Speaker 2: I asked this selfishly as a New Yorker in a

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Speaker 2: city that's very expensive to live in. Is that something

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Speaker 2: that they take into accounts or of what the cost

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Speaker 2: of living is like in a particular geography.

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Speaker 4: So, actually, most schools don't make regional adjustments. So you

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Speaker 4: could be making three hundred thousand and for a family

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Speaker 4: in a Midwest town where I'm from, like Tulsa, Oklahoma,

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Speaker 4: you are pretty wealthy and probably have enough money left

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Speaker 4: over after your living expenses, maybe to pay for a

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Speaker 4: ninety five thousand dollars education, but three hundred thousand for

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Speaker 4: a family in New York, very different cost of living.

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Speaker 2: All of this, Francesca says, leaves a lot of families

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Speaker 2: in the financial middle feeling squeezed.

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Speaker 3: So the people that fall in the middle that didn't

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Speaker 3: get enough aid but then can't afford to pay the

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Speaker 3: full sticker price, those are the families that are really

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Speaker 3: feeling like they need to either take on loans or

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Speaker 3: squeeze their finances to really go to these colleges that

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Speaker 3: they've dreamed about going their whole lives.

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Speaker 2: Conventional wisdom used to hold that for people on lower incomes,

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Speaker 2: public universities were the best option, with much lower sticker

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Speaker 2: prices for in state students than their private rivals. After

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Speaker 2: the break, why that's not necessarily the case anymore, and

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Speaker 2: why the data show it might be a better idea

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Speaker 2: for people from more modest backgrounds to aim for private schools.

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Speaker 2: Bloomberg's Paulina Ccerro and Francesca Maglione looked at what it

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Speaker 2: would cost students from families with a range of household

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Speaker 2: incomes to attend some of the most selective schools in

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Speaker 2: the country, both private schools and public universities.

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Speaker 4: From those two analysis, surprisingly we found that public schools

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Speaker 4: can actually end up being more expensive because they have

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Speaker 4: less resources. A family making seventy five thousand dollars ends

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Speaker 4: up paying twenty three thousand dollars for a public in

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Speaker 4: state public education, whereas a private school that has a

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Speaker 4: lot of financial resources they would pay just eight thousand,

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Speaker 4: So they'd pay three times more at a public school.

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Speaker 2: The ethos has been private school might be inherently unaffordable,

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Speaker 2: go for the in state school. But what you've found kind.

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Speaker 4: Of, yeah, it totally it reverses that. But I mean

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Speaker 4: there's a little bit more nuance to the math. So

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Speaker 4: once you start making two hundred thousand dollars, a public

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Speaker 4: school actually does start to become cheaper because you know,

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Speaker 4: public schools overall, their sticker price tuition tops out around

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Speaker 4: thirty thousand dollars, right, whereas if you're looking at a

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Speaker 4: prestigious private school, you can be close to paying one

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Speaker 4: hundred thousand. So for families that make seventy five thousand

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Speaker 4: dollars to one hundred and fifty thousand dollars a public

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Speaker 4: school will be more expensive, but you know, if you

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Speaker 4: make two hundred thousand dollars or more, the public school

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Speaker 4: will be cheaper. So it's a really weird breaking point

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Speaker 4: and kind of surprising.

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Speaker 2: Paulina and Francesca found a clear correlation between the size

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Speaker 2: of a school's endowment and how generous that college or

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Speaker 2: university is with its financial aid. If you're from a

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Speaker 2: low income family and you get into an ivy, you

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Speaker 2: get significantly more assistance, But Francesca says most applicants to ivys,

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Speaker 2: regardless of income, don't get in.

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Speaker 3: These students are left to decide between a handful of

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Speaker 3: schools where up picking what school might give you the

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Speaker 3: best financial aid feels a little random, and students have

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Speaker 3: no idea how these schools calculate their financial aid, how

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Speaker 3: they land at these numbers, So it kind of feels

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Speaker 3: like Russian roulette deciding what school might be more affordable

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Speaker 3: on the line.

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Speaker 2: In real terms, what does it mean for families who

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Speaker 2: are kind of convincing themselves of the worth of these

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Speaker 2: institutions and trying to make that math work. I mean,

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Speaker 2: we're talking about a pretty substantial percentage of income in

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Speaker 2: a lot of cases that would be going toward paying

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Speaker 2: for college or university.

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Speaker 4: We actually did a project last year looking at the

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Speaker 4: return on investment of college degrees. We analyzed over fifteen

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Speaker 4: hundred schools, and that took into account, you know, the

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Speaker 4: factors that a lot of families are thinking about today,

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Speaker 4: which is, you know, how much am I actually going

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Speaker 4: to pay for that degree? How much debt will my

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Speaker 4: child have to take on, what opportunities will be available

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Speaker 4: to them given that brand name degree, and you know,

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Speaker 4: what is their earning potential after It's a really complicated

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Speaker 4: calculus because it's not just about the cost, because if

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Speaker 4: you go to a small school that's cheaper, if it

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Speaker 4: doesn't provide you the network that you need to get

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Speaker 4: that job or to get a higher wage, than doesn't matter.

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Speaker 2: Did reporting this story change your sense of that story?

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Speaker 4: Even like five ten years ago, whenever a student would

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Speaker 4: get into that Harvard or into their dream school, I

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Speaker 4: feel like often parents would say, you know, no matter

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Speaker 4: the cost, like this brand name degree is going to

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Speaker 4: be worth it. We'll take on whatever debt, We'll take

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Speaker 4: on a parent plus loan, do whatever, like this will

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Speaker 4: help you achieve the American dream and to climb the

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Speaker 4: social ladder. But I think these days, because people are

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Speaker 4: questioning the value of a college degree, it's a little

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Speaker 4: bit more difficult. Is the family willing to put themselves

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Speaker 4: in a huge financial burden where their child in a

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Speaker 4: huge financial burden for a college degree that they don't

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Speaker 4: know will work out. New grads today are facing kind

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Speaker 4: of a tepid labor market, and even if you come

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Speaker 4: from a Harvard or a Yale, that doesn't necessarily mean

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Speaker 4: that you'll get a job. That's just the reality of

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Speaker 4: the white collar labor market today. So I think the

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Speaker 4: conversations are a little bit more difficult, and there's a

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Speaker 4: little bit more of a reality check for many students.

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Speaker 4: You have these students that work really hard, and we're

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Speaker 4: told that they are expected or should go to the

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Speaker 4: best school that they possibly can. But when you get

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Speaker 4: your financial aid package and realize what a financial burden

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Speaker 4: that could be on your family. I don't know what

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Speaker 4: I would have done at seventeen at that time, but

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Speaker 4: it's a difficult kind of moral dilemma for kids to

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Speaker 4: be answering.

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Speaker 2: It was a dilemma that's surprised not a Raja and

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Speaker 2: Viswanathan's son, I USh after he got into USC.

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Speaker 5: I mean, of course I knew that college cost something,

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Speaker 5: but you know, it never really registered that that was

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Speaker 5: like a thing that I needed to consider when I

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Speaker 5: was making a choice of college. Like you know, I

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Speaker 5: guess I sort of assumed that because students were able

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Speaker 5: to go to these places, you know, I would be

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Speaker 5: able to go to these places.

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Speaker 2: I Ush's parents tried to find a way to make

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Speaker 2: the numbers work, but the math was brutal, just like

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Speaker 2: back when not Aajen got into Stanford more than thirty

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Speaker 2: years ago.

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Speaker 1: Does any of you going to be impossible for us

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Speaker 1: to foot the bill? It hurt me quite a bit,

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Speaker 1: was very very shocking for me to have to live

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Speaker 1: through that moment again.

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Speaker 5: As a student. You spend so much time applying to

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Speaker 5: these universities, writing those essays, you know, getting letters of recommendation,

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Speaker 5: doing all of these things, and then you put in

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Speaker 5: all that effort, you get accepted, You tour the campus,

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Speaker 5: you really enjoy it. You're walking around envisioning yourself as

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Speaker 5: a student, and then you know that sort of ideal

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Speaker 5: being stopped by something that's more or less out of

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Speaker 5: your control is I mean, yeah, it stings quite a bit,

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Speaker 5: but the decision was a little easier for me because

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Speaker 5: I already had another great option UCLA, which was in

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Speaker 5: the same area.

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Speaker 2: Is now studying neuroscience. Like his older brother, he wants

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Speaker 2: to become a doctor. In the meantime. To keep expenses low,

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Speaker 2: I usually lives in a triple a dorm room he

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Speaker 2: shares with two other students. He chose the school's most

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Speaker 2: affordable meal plan. His dad says that all Ayusha's college

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Speaker 2: costs are around thirty thousand dollars a year. That's a

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Speaker 2: third of what USC would have cost.

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Speaker 5: A sticker shock. Seeing like the price of certain schools

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Speaker 5: can be quite daunting. But if I were to speak to, say,

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Speaker 5: a student who is considering to apply to these sort

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Speaker 5: of elite schools, even a middle class student who may

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Speaker 5: not get that much aid, that still might be very

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Speaker 5: expensive for them. I wouldn't say to discount applying to,

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Speaker 5: you know, an elite university or these kinds of places.

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Speaker 5: I'm just saying to consider the financial aspect of things,

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Speaker 5: and when you're signing on the dotted line, getting all

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Speaker 5: of your facts straight, and I think if you do that,

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Speaker 5: you're more than welcome to apply to these schools.

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Speaker 2: This is The Big Take from Bloomberg News. I'm David Gura.

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Speaker 2: This episode was produced by David Fox and Rachel Lewis Krisky.

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Speaker 2: It was edited by Patty Hirsch and Craig Giemona. It

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Speaker 2: was fact checked by Adriana Tapia and mixed and sound

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Speaker 2: design by Julian Weller. Special thanks to Anne Joy. Our

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Speaker 2: senior producer is Naomi Shaven. Our senior editor is Elizabeth Ponso.

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Speaker 2: Our deputy executive producer is Julia Weaver. Our executive producer

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Speaker 2: is Nicole Beemster Boor. Sage Bauman is Bloomberg's head of Podcasts.

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Speaker 2: If you liked this episode, make sure to subscribe and

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Speaker 2: helps people find the show. Thanks for listening. We'll be

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Speaker 2: back tomorrow