Never too early to plan for college expenses

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Senior year

Now the strategy of where to apply for college becomes critical. Because public colleges have less aid to offer middle-class families than private schools, students from moderate-income families should apply to private and public schools. Affluent families might find public universities more affordable than private colleges because wealthy people won't get aid at private ones unless the student has a talent, high grades or high scores on SAT or ACT exams that are desirable at that school.

Students can get more aid from some schools based on the diversity they will bring to the class. For example, a Midwesterner might be more attractive to a private school on the coast than a student who lives in that state. Financial aid offices might work to attract a male to a school that's 60 percent women. A school that tends to be popular with one race might try to attract a student who will bring diversity.

Almost all schools try to lift their rankings by attracting students with SAT scores higher than the average at that school. So a B student might be attractive to a private college that isn't well-known. Such a college could be identified in a college guidebook like the Fiske Guide to Colleges and the second- or third-tier rankings in the U.S. News & World Report Best Colleges issue.

The student should apply to about 10 colleges. Each college will treat aid differently. When the offers arrive, if the student has been accepted to one college that's provided a lot of aid but gets little offered from a top-choice school, there will be options to get more aid. The student, or the student's parents, can call the financial aid director at the preferred school and tell the director about the better financial aid offer from the other school. It's acceptable to ask the financial aid officer to sweeten the deal so the family can afford the college.

If the attractive offer is from a comparable school, it will work best, so keep that in mind when applying for colleges. Also, make sure to meet each school's deadline for filing FAFSAs and PROFILE forms.

Parents should talk upfront with students about money so that if a favorite school won't sweeten the deal enough, the student realizes the impact of having to borrow more. This student loan calculator will help students envision monthly payments.

Students should not take on total student loans that will be more than their likely first-year salary. The average student with loans leaves college with about $26,600 in debt. That would be fine for a petroleum engineer making over $100,000, but iffy for a psychology or art student. Here's a look at starting salaries.

Pick loans carefully with the help of the college financial aid office. Federal Stafford and Perkins loans, which you get at college aid offices, tend to be best because they are covered by a helpful federal program. After a student finishes college, the government will temporarily reduce loan payments on federal loans if the person can't find a job or has a low-paying job. Here's where you can find Find information on federal loans.

Sometimes private loans can carry lower interest rates than the 6.8 percent on federal unsubsidized Stafford loans, but shop carefully. Some carry teaser rates that will shoot up if a payment comes in late.

Parents can also borrow with Federal PLUS loans at 7.8 percent, but parents shouldn't go in debt if their children can get federal loans or low-interest loans offered by state departments of education. Parents can always help their children pay off student loans, but parents should make sure they are saving adequately for retirement before overdoing it. Try this the ballpark estimate calculator.

Finally, before panicking over a college's price tag, realize that most schools will put you on a payment plan so you can pay monthly the same way you do a mortgage. And remember that while you are paying for a child's dormitory or living expenses at college, that means transferring some of your usual household budget for water, electricity, food and maybe car insurance to a different expenditure because your child is in a different location.

In other words, don't think of your old budget and tag on the full college bill as new money. In addition, you won't be saving for college anymore, so that will provide some relief. A little more relief will come at tax time when most parents can use college tax credits that might be as much as $2,500.

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