Saving for College? Plan Ahead

Even if you save for years, it probably won't be enough to put your child though college.

A survey from Fidelity Investments found that 63 percent of parents with kids 18 and younger who have saved for college estimate their savings are on track to cover about 18 percent of college costs. That leaves a lot of ground to cover with financial aid and loans.

And that gap is only going to get bigger, says Alan Samuels, chief product officer of People Capital, a "peer lending" website that matches students with lenders. The cost of college is rising faster than inflation and a gap between a family's college savings and the cost of tuition has become the norm, he says.

Indeed, the college financial aid process has a little wrinkle known as the Expected Family Contribution. That's the portion of tuition that parents are expected to pony up after all financial aid is factored in, based on the family's income and assets.

But by researching financial aid carefully and following along through the application process -- even after it's over -- you can send your kids to college without going broke.

Before beginning the financial aid application process, make sure your future college student has a Social Security number and get all your tax returns together. You will need both for all the paperwork that follows.

The first step is the dreaded Free Application for Federal Student Aid, also known as the FAFSA form. Yes, it is intimidating at first glance -- the instructions run 70 pages -- but it is a requirement for all federal financial aid and nearly every college demands it. You can file an electronic form for free and the department's website recommends against using paid sites to file electronically: The first F in FAFSA stands for "Free," it warns.

The U.S. Department of Education has several resources to take the sting out of the FAFSA form. It provides a worksheet online that applicants can read and complete the questions before tackling the full form. It also has a checklist of the documents you will need to fill out the FAFSA.

You also can try out the FAFSA4caster section on the department's website, where you enter your family's financial information and get an estimate of how much aid your child is eligible for before filing the FAFSA. Then, you can import that information into an online form and continue the process.

Some schools also require a CSS Financial Aid Profile from the College Board as part of their application process. Unlike the FAFSA form, the initial application costs $25 and includes one college report; every report after that is another $16. That one also can be filed electronically on the College Board's website.

The FAFSA form is used by colleges to determine what financial aid they will offer based on need. Federal Student Aid, an office of the Department of Education, processes the FAFSA and issues a Student Aid Report that includes the Expected Family Contribution colleges use to award need-based aid, including grants, loans and campus-based aid such as work-study jobs and supplemental grants.

The federal grants include the Pell, which is based only on need, as well as others that are more specific, such as Teacher Education Assistance for College and Higher Education (TEACH) Grant for future teachers that require a two-year commitment to teaching public school after graduation, and the National Science and Mathematics Access to Retain Talent (National SMART) Grant. While those are based on need, they do require students to keep up their grades, usually a 3.0 GPA or better. The federal loans include the Stafford and PLUS loans, which are subsidized by the federal government and payment is usually deferred until the student graduates and can pay it back.

But colleges have to spread that aid among all students eligible, so often the award will fall short of the total. That's where merit-based scholarships come in, and it pays to search them out.

Scholarships are not based strictly on family finances, but factor in academic performance, projected major or even the student's background. The requirements can be very specific: Polish-Americans can apply for a $5,000-a-year Albert Spiezny Journalism Scholarship, education students in Delaware can get $5,000 a year from the Christa McAuliffe Teacher Scholarship Loan and female engineering students can get a Texaco Scholarship for $2,000 per school year.

Many sites offer help searching out scholarships, but one good place to start is the Education Department's site, which has a search engine that sorts out scholarships by keywords. And the federal government's Students.gov website also has a section with links to state offices that offer financial aid help.

There are many websites claiming to help with student financial aid, but to be on the safe side, deal only with sites from known organizations. The federal government offers plenty of information on applying for financial aid through Students.gov and the Department of Education's student aid portal.

Among the private-sector sites, The College Board provides pages with advice on researching college prices and financial aid and how to apply for various sources of cash for college. Student lender Sallie Mae has a section of its website with a step-by-step guide to apply for financial aid, a checklist for sorting out student loan lenders and a free database of scholarships. The College Confidential site, run by education company Hobson's Inc., also has a section on financing college with additional resources and a members forum so parents and students can share notes.

But, if after all is said and done, you're still short on cash, you can always appeal the college's financial aid award. It's a no-lose proposition: Your kid has already a financial aid offer in writing; it can't be reduced.

Kiplinger.com has an interactive feature, How to Interpret a College Financial-Aid Letter, that lets you roll over a sample letter and explains what each highlighted term means, the value of each kind of aid and tips to gauge how they will affect the parent's financial standing.

If you feel your financial situation is not as flush as the college thought it was, or if another college your kid applied to offered more money, contact the financial aid office and ask for an appeal. The College Board recommends calling for an appointment, rather than trying to appeal by phone, and bringing documentation such as the letters with student aid offers from other schools.

You need to make that call early, because the paperwork will move slowly and aid offices can be overwhelmed once admissions letters go out. You don't want to be waiting for an answer while shopping for dorm room supplies.

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