Life Changes 2008

A Saving And Loan Plan For College

By Shelly K. Schwartz, |Special to CNBC.com

We all want the best for our children, of course, but giving them the educational tools to succeed doesn’t come cheap.

Indeed, if the cost of college tuition continues to climb at twice the rate of inflation, a four-year degree at a public university (in-state) will cost roughly $160,000 in 18 years. A private school will cost double that.

Yet, with careful planning, a commitment to saving and skillful use of tax breaks and low interest loans, most parents will not only be able to give their children a solid college education, but do so without sacrificing their own financial future.

"Parents often feel paralyzed when they research the costs of higher education but it is important to remember that families often do not have to pay the full cost because of scholarships and financial aid," says Cynthia Bailey, executive director of the College Board, a nonprofit association of colleges and universities. "Even as little as $25 a month will add up over time because of the affect of compounding."

Here’s a list of do’s and don’ts to consider as your budding scholar edges ever closer to the halls of academia.

Don’ts

1. Don’t panic.

College may sound unaffordable, but bear in mind that 56 percent of students today attend four-year schools with annual tuition and fees below $9,000, according to the College Board. After grants, federal tax credits and employer assistance are added in, the average undergraduate student at a public four-year school this year paid just $2,600 in in-state tuition and fees --

well below the $6,185 published price. Other forms of financial aid (federal work study, low-interest loans, grants or scholarships) can further reduce your family’s out-of-pocket costs.

2. Don’t stop saving for your own retirement

As financial planners are wont to observe, no one will give you a scholarship to fund your own retirement, but there are countless forms of aid available to help your child pay for education. Save for yourself first.

3. Don’t suffer sticker shock

If your child is Ivy League material, by all means, apply to the top schools. Many of the most selective colleges offer financial aid packages (grants and loans) that reduce their annual price tag by less than half.