If you're a parent staring down the barrel of annual college tuition increases and contemplating the prospect of sending your child into the job market burdened with as much debt as your first mortgage, what can you do?
Here are five ways to manage costs:
Seems obvious, but start saving now. Don't just salt money away in the bank; you'll never keep up with inflation, for one thing. You might also do as much harm as good when it comes to financial aid because assets in your child's name will count against them.
"If you start out when they are young, by the time they're ready to go, you'll have a good amount," said Lynda George, director of student financial aid at the University of Kentucky. "But you have to be very disciplined and consistent. You just have to make it a priority to save."
But it's as important to think about what to save in as it is to save.
Make your family finances as attractive as possible to qualify for financial aid. Talk to a financial adviser or tax accountant about what makes the most sense for your income and age regarding saving for college.
Pay off your debts (college loans, for instance); the formulas that colleges use don't weigh how much debt you have so you could end up with two generations of student loans at the same time.
Fund your own retirement first. If you're doing that and still have money left over, consider a 529 Plan account for your child, which allows you to invest a significant amount of money that can grow tax-free.
If you have to choose between your retirement savings or putting aside college money, the smarter option likely will be a Roth IRA. You can fund college savings from the IRA but you can't use money from the 529 for your retirement without paying a penalty plus taxes.
George said parents and students today often have to put together a complex package to cover the cost of tuition, books, living expenses and transportation.
Savings, home equity loans, pensions, other retirement income and insurance funds all are often tapped these days.
But the biggest factor in how much help your child qualifies for will be the FAFSA, or Free Application for Federal Student Aid, the federal form families fill out when applying for financial aid. That takes into account a variety of factors, including the family's income, savings and investments and the age of the older parent.
That can be a benefit for older parents: The closer you are to retirement, the less of your income and savings the government will assume you can contribute. It's better still if you will be retired when your child goes to college: Retirement income is exempt.
"It's a graduated scale based on the age of the older parent," George said.
The formula varies depending on the school; private schools use different criteria and some might be more generous than public universities.
Parents usually are expected to pay a hefty percent of income/savings after age-related set-asides are taken into account, she said.
But here's where money you've saved specifically for college can count against you: plain savings, including U.S. savings bonds, and custodial accounts in your child's name will be considered "student assets" in the formula, which might assume that your child can put as much as 25 percent of that amount toward college each year.
So if you and your spouse both put aside $5,000 for each of the past 10 years, you'd have at least $100,000. If it is in your child's name, you might have priced your child out of financial aid.
"The vast majority will look at what the family is expected to contribute and say, 'no way,' " George said.
529 Plan accounts can be a great way for grandparents to give a gift that will last well beyond Christmas. Meemaw and Poppy can give significant amounts without incurring taxes and it won't count against most funding formulas for need-based scholarships or grants at public schools. It can be a great thing to save for senior year, when a student won't have to apply for financial aid again.
"It's more advantageous from a grandparent than a parent," said Robert Flashman of the UK Department of Family Sciences. "That's what I'm doing for my grandchildren."
Be prepared to bargain. David Ziebart, an accounting professor at UK, said parents should get multiple college offers.
"A lot of first-generation college parents don't realize that there's 'sticker price' and then there's the 'real price,' " Ziebart said. "A lot of parents will qualify for aid, and those with higher-performing kids will be able to negotiate. It's like sitting down with a car dealer. Here are the portfolios other schools can provide; what can you do?"
Don't assume that public universities will be cheaper than private colleges. Private schools might be more willing to deal, especially if you have some savings. Some private colleges have even floated the idea of accepting a tax-deductible donation instead of tuition, Ziebart said.
Make your child as attractive as possible to colleges. Again, it might seem obvious but that means getting good grades and test scores. Think beyond athletics: Almost every interest from band and orchestra to debate team probably has some kind of scholarship program.
"For a lot of universities, their most valuable asset is the student applicant pool — who they are able to attract," Ziebart said.
So your child can be a top recruit even if he or she doesn't play basketball. Parents should use that leverage to put together the best education for the money.
Of course, there is money for good grades: The Kentucky Educational Excellence Scholarship, or KEES, funded by the Kentucky Lottery, will pay Kentucky students up to $2,000 a year in college based on high school grades, Flashman said. Awards are available for grade-point averages 2.5 to 4.0, and bonus awards are added for ACT scores as low as 15, Advanced Placement scores 3 to 5 and International Baccalaureate scores 5 to 7.
Make your child work for it. Work-study programs during the school year or summer, which make students directly responsible for earning money to pay for some of their college costs, can be financially and academically advantageous.
"If your kids have some skin in the game, they're going to take it more seriously," Ziebart said.
Student loans, which must be repaid no matter how long it takes, should be a last resort, Flashman said, in part because they can impact the next generation.
Lobby lawmakers. One big reason public university tuition costs have risen so steeply in recent years: reduced funding from the state government to schools. If you think that education should be a bigger priority, then tell your elected representatives.
Gov. Steve Beshear has appointed a task force to look at tax reform. Some states give parents a tax credit for saving for college; Kentucky does not. If you want one, talk to Frankfort.
If you want Washington to take education into account when they address the upcoming "fiscal cliff," call Congress.