Playing College Funds System as Difficult as Playing Markets

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It's becoming more and more difficult - and expensive - to finance a child's college education these days. That probably accounts for the many letters we received after my last column on financing college tuition.

Many of you folks are feeling the agony and despair of figuring out how you're going to pay the incredibly high price of a college education. Trying to decipher the system is nearly as tough as trying to play the stock market.

So, let's take another look today and see if we can't figure out together how the financial aid game works.

The bad news is there are more and more kids who want to go to college. It's what we call a buyer's market; the colleges can pick and choose from among the best. However, most attempt to select students from different backgrounds, including the ability to pay.

In theory, those who need aid the most are entitled to the most. In practice, the aid goes to those who best understand how to get it.

The good news is that there is a lot of financial aid out there, if you know how to get to it. There is $26.5 billion available from the federal government this year alone, most of it through the Guaranteed Student Loan program.

The first thing you must determine is eligibility. Many experts recommend you begin the college application and financial aid application process when your child is a high school junior. This gives you a head start on what you're up against.

Next, you have to apply for aid through the proper channels. Here's the first quirk in the system: You have to apply for a Pell Grant ($2,500) from the federal government before you can apply for a Guaranteed Student Loan - even if you don't get the Pell Grant. Most colleges look at this as a qualification before they give financial aid, too.

No matter what financial aid you seek, your family finances are going to be closely scrutinized. One financial aid officer suggests applying when you do your income taxes, since both require much the same information.

You must fill out the aid forms carefully, accurately and truthfully. They ask for information about your assets, savings, salaries, number of children, and if others are in college already. One family who planned to send their daughter to Stanford had a call from an appraiser, to determine the value of their home.

What kind of aid can you expect? There are loans, grants, scholarships and work-study programs. First-year students are expected to have worked in high school, to help pay for their college, and they are expected to contribute $700 a year minimum while attending college.

The most difficult aspect is determining how much the family is expected to contribute. This is the basis for determining all the other forms of aid your child might receive.

You're permitted - if that's the right word - to set aside money for the mortgage, living expenses, taxes and retirement. …