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How to avoid paying full college sticker price

U.S. parents with children younger than 18 are likely to have two main financial fears these days: getting their kids into the "right'' college and paying for it.

The sticker shock of the ever-escalating price of college is a mushrooming mass anxiety. If you do some research, though, you can obtain money for higher education from a variety of sources that may not be so well known.

When Burton Baker, a financial planner in Williamsburg, Va., and founder of http://www.investforcollege.com, began planning for the education of his son Ian, now 3, he did so right after the child was born, compiling historical rates of college tuition inflation for various colleges.

"I wasn't finding the information I wanted, so being a quant freak, I started a database on my own," says Baker, who has studied how much colleges have raised tuitions over time.

What Baker found -- and you will discover when you do some research -- is that your total college bill isn't the posted "sticker price" a college lists, but what you owe after discounts, grants, scholarships and work-study programs are applied at each institution.

Finding out what you will actually pay at any given college is a game of speculation, arithmetic, chance and application.

You can look at past tuition increases and try to extrapolate, assuming that a school will keep on doing what it did in the past. Or, you can improve your odds by choosing colleges that award a generous amount of financial aid.

Even with the attention given to the high price of college, 63 percent of undergraduates enjoy some form of financial help. A record $129 billion of aid is available today, according to the College Board, a research and testing service, with grants averaging $3,300 per student at public four-year schools and $9,600 at private institutions.

Generous schools

The average overall aid package was $7,352, according to the National Center for Education Statistics (NCES), a government research organization; and the National Association of Student Financial Aid Administrators, a professional group in Washington.

When I dig into the NCES numbers a little more, I discover that private schools tend to be more generous with aid than public schools. They also charge much more for tuition. The average award at private colleges was $13,147, with 83 percent of their students receiving help. For public schools, the package was $7,619 for almost 70 percent of students, according to a 2005 report.

Of course, obscured in those superficially rosy numbers is the fact that more than half of students are offered loans. The subsidized federal Stafford program alone has grown 75 percent over the past decade and nonfederal borrowing has increased more than 10-fold.

Pulling together a package As a result, students are graduating with an average of $17,000 in loan debt from public colleges and $22,000 from private schools. And that doesn't include parental loans, home equity or credit card debt, so the total indebtedness is much higher and can be six figures in many cases.

Ideally, you should apply for all forms of financial aid, yet concentrate on obtaining grants and scholarships that don't need to be repaid.

While it may be generally true that private colleges are more generous with grants -- especially if they have multibillion-dollar endowments -- the key figure is the percentage a college awards in grants relative to loans and other aid. To find that ratio, see the College Board's "cost and financial aid" profiles at http://apps.collegeboard.com/search/index.jsp.

For example, it's reported that Princeton University awards 96 percent of its aid in grants and scholarships for an average package of $27,457. Tuition and fees are $33,000 annually.

Save early and often

In comparison, the University of Pennsylvania doles out grants to 66 percent of its students for an average of $26,978. Tuition and fees at Penn are more than $32,000 a year. I'm not comparing other attributes of these fine colleges, nor am I including room and board and other fees. Financial aid is one consideration among many.

Also keep in mind that colleges don't have the last word on aid. There are other sources of funding that may be available. Go cyber-shopping at http://www.collegescholarships.com, http://www.fastweb.com and http://www.scholarshipexperts.com.

Saving early and often is another good idea. Start a Coverdell college-savings account if you qualify. Save through credit card and rewards programs like Upromise, Baby Mint and Littlegrad. Saving on loans

Don't wait or expect your lenders to offer you a deal. You have to do the paperwork yourself and deal with them directly. It also doesn't make sense to wait another year for student loans to become less expensive.

With the Federal Reserve battling inflation again, that means the central bank will probably keep tightening short-term rates. Since federal student loans are annually indexed to 91-day Treasury bills, it's more than an academic argument that the cost of financing will continue to shadow tuition increases.

Wasik, author of "The Merchant of Power," is a Bloomberg News columnist. The opinions expressed are his own.

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