Paying With Less Pain

Of course, you should buy Christmas presents in July, when they're on sale. And, yes, you should have started raising money for college years ago. But if you've waited until the student is well into high school, don't panic. Even at that late date, students can improve chances of earning an affordable degree if they flout a little conventional wisdom and some government instructions. (Don't worry; it's legal.)

Be cost conscious. Nowadays, students should include a few affordable schools - schools that are low cost or likely to give big scholarships - on their list. That means applying to at least one in-state public university or community college. To further increase chances for aid, students should also apply to schools that need whatever unique diversity, talents, or grades they offer. One common strategy: Apply to one or two schools in which the student's grades and test scores are in the top 25 percent of the student body. Students of either gender can also apply to one or two schools that are short on their gender - boys to liberal arts schools, for example, or girls to tech colleges. Most colleges post grade, score, and demographic information on their websites. Students who want to look for several schools that might serve as safety options can use the selection tool at the U.S News Web site

Be wary of early. In late fall of their senior year, students should consider bucking the trend toward applying "early decision," to increase chances of admission. Too often, those fat letters arrive in December with a price-less aid. Linda Taylor, a private financial aid counselor in Agoura Hills, Calif., advises students concerned about affordability to use standard or nonbinding "early action" applications instead.

That %$#& form! In early January, it's time to throw out some government advice. Don't believe the Department of Education's claim that it takes only about an hour to fill out the 124-question Free Application for Federal Student Aid. Set aside several hours to round up tax forms, pay stubs, and other documentation. And expect to spend at least a couple of hours making entries on the FAFSA and its work sheets.

The FAFSA is supposed to determine who really can't afford tuition and thus should receive need-based grants. Typically, students from families with incomes of less than $40,000 receive federal Pell grants. Students from families earning two or three times that amount may be able to show enough expenses to receive state or college grants.

But even wealthy students must fill out the form to qualify for some college merit scholarships as well as the federal government's Stafford program, which offers reasonably priced loans to students regardless of need.

Don't wait for the taxman. Parents should also ignore the form's recommendation that they file their taxes before tackling the FAFSA. Since many schools hand out most of their aid money in late winter and early spring, it is wiser to fill out the FAFSA in early January using estimates based on the previous year's taxes. Parents can do their taxes and update the FAFSA later.

Don't count the ex-hubby. Unfortunately, there aren't many last-minute legitimate financial maneuvers to get the FAFSA to spit out a lower Expected Family Contribution-the amount the government estimates the family should pay for college.

But families can at least avoid mistakes that make them look richer than they really are. Divorced families, for example, need only report the income of the parent with whom the child lives at least 51 percent of the time, which isn't necessarily the parent taking the child's income tax deduction.

Also, for all its questions, the FAFSA misses many legitimate expenses that can reduce a family's ability to pay tuition, such as medical emergencies or care for a relative. Parents who feel the FAFSA doesn't fairly describe their financial situation, or who have suffered a job loss or pay cut, should immediately send letters explaining their circumstances to the financial aid offices considering the student's application.

Spring forward. The feeling of financial frustration ratchets up in spring, when offer letters arrive. The reason: It's difficult to compare offers from competing schools because schools use different words to make their awards sound more appealing than those of their competitors.

Worse, some offer letters are misleading. Some schools give big merit scholarships with hidden strings (like unrealistically high grade-point minimums) that make it unlikely the student will receive the same award in the future. Before popping the champagne and sending a deposit, students should ask the terms for renewing each scholarship and what percentage of others have kept similar scholarships.

Many schools also include five-figure PLUS loans in their awards. Independent counselors like Taylor call this misleading. At about 8 percent, the loans-available to any parent with at least average credit-aren't much of a deal, she argues. And, of course, they must be paid back.

Do the college math. To decode each offer, students should come up with a realistic total cost of attendance for each school: adding tuition, fees, room, board, and about $3,500 for extras like textbooks, travel, cellphone, clothes, and Saturday-night pizzas. Then subtract the annual grants and scholarships likely to be renewed. Finally, multiply that number by five, since only a minority of students manage to earn a degree in four years these days.

Driving for dollars. If the out-of-pocket costs for the student's top choice look too high, it can't hurt to appeal for more aid. "But don't use the term negotiate," warns Don Betterton, the former director of Princeton's financial aid office. Do it in person, if possible, Betterton recommends. "That is much more effective than a letter or E-mail." And if you have a chance to increase your aid by $4,000 or $5,000, that's worth the trip. Bring as much documentation for your case as possible, he says, including reasons that the family can't afford the expected contribution, any new achievements that make the student a great catch for the school, and better offer letters from competing schools. Sweeten the message with a little (honest) flattery by emphasizing, "You are our first choice," Betterton advises.

Don't build your hopes too high, though. Only about half of all appeals result in higher awards. Thus, even families who've done everything right usually have to come up with several thousand extra dollars to cover the student's freshman bills.

Extra money. If the amount of money students earn or borrow themselves isn't enough, parents can also find clever ways of raising cash on their own. Low- and middle-income families should take advantage of tax programs such as the Hope Scholarship and Lifetime Learning credits of up to $2,000.

Many parents are pleased to discover that when their child moves out, grocery bills can drop, freeing up money that can be contributed to tuition. A student who doesn't take a car to college and who asks to be listed on the family's insurance policy as an "occasional driver" of the household's least expensive car can also save a couple of thousand dollars.

Unfortunately, these steps are rarely enough. Most families can cover tuition only by tapping savings and borrowing. There are strategies to make these options less painful, however. Spending down education and savings accounts can reduce assets that might have stopped the student from getting need-based aid. Retirement accounts shouldn't be tapped, because of tax penalties.

PLUSes and minuses. Parents willing to borrow to fund their child's education have two lower-cost choices. The federal Parent Loans for Undergraduate Students (PLUS) are capped at 8.5 percent, though adding fees as high as 4 percent of the total debt means the maximum annual percentage rate can top 9.4 percent. Some lenders, however, such as the Missouri Higher Education Loan Authority (mohela.com), offer discounts. PLUS loans are good options for middle-class families or those who don't have home equity to tap. Families earning less than $135,000 can qualify for the education interest tax break. And PLUS loans are canceled if the parent or student dies. But for anyone who earns too much to take the education tax deduction and has home equity, leveraging a home can be a cheaper option. Mortgages can be fully tax deductible.

When all else fails. Naturally, many parents have good reason to be leery of hocking their houses, so students facing out-of-reach college bills have to consider other ways of cutting costs. Living at home and attending a community college for the first two years can save tens of thousands of dollars. Alternatively, students can spend their free time studying for the College Level Examination Program or DSST. Good scores qualify students to get credit for-and thus potentially skip-a semester or two. It can be a real grind to spend the summer studying and taking tests. But that work and the $300 to $400 in fees for five tests could save an entire semester's tuition.

Studying hard, long the key to a more valuable college education, is increasingly also the ticket to a more affordable degree.

Explaining the complicated world of financial aid is a top priority for U.S. News's Web site. You can research college costs, calculate savings, and post questions to a forum

Tip. You fill in your FAFSA, and the replies flood back, but they're full of jargon. The next step? Financialaidletter.com helps make sense of them - with examples of real letters.