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For a start, don't be intimidated by reports of astronomical college costs. They apply to relatively few students: only about 80 colleges and universities charge more than $20,000 for tuition and fees. Add room, board, books and incidentals, and that number jumps to 300--out of 3,600.
Moreover, even at the priciest colleges, the real cost, after all aid is factored in, is just under half the sticker price. That's for the theoretical average student, of course, and shouldn't be taken to mean that you can just lop half the cost off any college's price tag and expect to pay that amount. But it does mean that, as Deputy Secretary of Education Mike Smith says, "the resources are there." You need to find them, and you need to plan. "No matter how old your child is," says American Express's Satovsky, "saving for college is paramount."
How to plan depends on where you and your children are in the cycle. The more time you have, the better your chances of meeting your target. Even if your child is within a year of enrollment in college, however, there are many strategies that will make college an attainable goal and resources that will help get you there.
THE LAST-MINUTE SCRAMBLE
The endgame tactics for paying the college bills are less about stashing away money and more about reducing the amount you'll pay. You can cut your college costs considerably before you figure in how much aid you're eligible for, how much you'll have to borrow or whether the new education-related tax credits apply to your family. So, even if you don't give it a thought until spring of your child's senior year in high school, you can still pull it off.
Let's say your child is accepted by all six colleges to which he applies. For starters, congratulations! You must be proud. Remember that when colleges accept applicants, they actually want them to come and will do what they can to make that happen.
At the outset, each school will evaluate your FAFSA (Free Application for Federal Student Aid) using a federal formula to determine how much federal aid you're eligible for, including loans with competitive interest rates, like the Perkins and Stafford (see chart). You'll receive a report from each school advising you of your expected family contribution.
Once that is determined, each college will decide how much money it will kick in from its own coffers. Public schools tend to be stingier with aid, but their fees are much lower to begin with. Private schools, on the other hand, show big numbers up front but are more likely to discount. Altogether, nearly 70% of all students receive some type of aid, including loans, and the average amount of federal money awarded to students is $7,441.
Grants aside for the moment, virtually any full-time student, regardless of income, is eligible for a federal college loan--an appealing option since the interest rates on loans, including Stafford. by far the most widely used, were lowered this year.